In the record-shattering year of venture investing, there is one industry that dominated.
Software.
Yes, software has always been huge — venture capitalist Mark Andreessen famously said years ago that Software is eating the world. But in 2014, it reached unseen levels of funding.
Why? Because of those smartphones we carry around, everywhere. Software isn t just programs loaded onto our computers at work. The software sector today includes digital marketplaces and apps for transportation, such as Uber; for health care, such as Doctors on Demand; and for modernizing the banking industry, such as LendUp.
Software is changing everything, said Mark McCaffrey, a software industry expert with PricewaterhouseCoopers. We re talking about everyday activities.
These sectors are some of the fastest-growing, and most fought-over by VCs, in the tech world. Uber, for instance, laid claim to the two largest funding deals of 2014, to the tune of $1.2 billion a piece.
Last year, VCs put their money where their mouth is. Firms in 2014 invested $12 billion into software companies based in Silicon Valley — the most any industry has raised from VCs ever in this region, according to the MoneyTree Report released Friday, a quarterly venture capital report from PricewaterhouseCoopers and the National Venture Capital Association that uses Thomson Reuters data. Nationally, software companies received $19.8 billion, or 41 percent of the total invested in all companies last year — the highest it s ever been. For 21 quarters straight now, software investments have been on the rise.
There s a lot of enthusiasm for these companies, said John S. Taylor, head of research for the National Venture Capital Association.
From 2008-2013, software companies that do not include the top-100 list (such as Oracle or Symanetc) grew by 150 percent, according to Deven Parekh, managing director at Insight Venture Partners.
There is a heck of a lot more profitable software companies, he said.
Basically, startups today look a lot more like high-quality software enterprises than some half-brained idea hatched in a college dorm room, which one could say described some of the companies that got funding in the dot-come boom. Many have annual revenue in the hundreds of millions of dollars and, at least VCs believe, will be profitable one day soon.
It s so easy to use, it s so disruptive, it s so quick to be adopted, so people really start to see the potential of this market globally, McCaffrey said. I think that has really pushed this level of investing in the sector right now.
