Quarterly Infrastructure & Enterprise Software investment rallied in Q1 2017 after a disappointing Q4 2016
- In 2016, Infrastructure and Enterprise Software saw QoQ growth in both amount invested and number of deals between Q1 and Q3, before seeing a sharp fall on both counts in Q4. Q1 2017 did see an upturn on number of deals and total amount invested compared with Q4 2016, but are both lower than Q1 2016 on both counts, with each figure seeing a 19.3% and 19.8% decrease, respectively.
- Q3 was the most active quarter of 2016, and was the sector second highest quarter in terms of deal count to-date with 68 deals. The sector record quarter for deal activity was back in Q2 2015, when there were 73 deals.
- Q1 2017 largest investment saw Palo Alto-based SentinelOne receive a $70m Series C round back in January. The round was led by Menlo Park-based Redpoint, with co-investment coming from Sound Ventures, Data Collective, Granite Hill Capital Partners, and three other prominent investors. The firm is a cybersecurity company provides next-generation endpoint protection software on a global scale.
Infrastructure & Enterprise Software investment in Q1 2017 shows this year may fall short of 2016 record deal tally
- Q1 2017 has shown that investment in the sector is set not to reach 2016 total for number of deals if maintained. Q2 looks to be following the same trend, with the first half of the quarter yielding only 20 deals. The amount invested however already surpassed Q1 total by over $100m.
- 2015 total of over $2.5bn worth of funding for Infrastructure & Enterprise Software focused companies was a record haul for the sector, and was a 73.6% increase on 2014 total. The largest deal of the year went to San Francisco HR software company Zenefits, which raised a huge $500m Series C funding round in Q2 2015 in a round co-led by TPG and Fidelity Investments.
- Despite volatile funding, the deal count for the 2014-2016 period showed small but consistent growth at a CAGR of 5.5%.
- 2016 was a record year for investment activity in the sector with 229 deals spanning the four quarters.
- The average funding round size in 2015 was $11.6m, $4.1m higher than 2014 average deal size of $7.5m.
Infrastructure & Enterprise Software 10 most active investors is dominated by US-based companies
- The most active investor in the Infrastructure & Enterprise Software space invested a combined 85 times since the start of 2014 meaning 12.3% of the overall funding rounds in the sector during the period had one or more of the 10 most active investors participating.
- Every investor to make the list is California-based, bar two. The two exceptions are chart-topping New York-based Y Combinator and Maryland-based VC New Enterprise Associates.
- Four of the top 10; Right Side Capital Management, FundersClub, 500 Startups, and Y Combinator, are all predominantly accelerator-type early stage investors, whereas the remaining six are all venture capital firms specialising in larger, later stage investments.
Accounting companies received nearly a third of the total funding to the Infrastructure & Enterprise Software sector since 2014
- 8% of deals since 2014 in Infrastructure & Enterprise Software have gone to companies that focus on producing Accounting software solutions. The largest of which was received by San Francisco-based Financial Force in the form of $110m-worth of private equity in late-March of 2015. The round was led by TCV with added contribution from Saleforce Ventures.
- The two largest deals in the sector to date: the Zenefits funding round mentioned earlier and AvidXchange $225m equity financing in 2015, were received by companies specialising in the two smallest sub sectors in terms of deal share. Zenefits and AvidXchange specialise in HR/Payroll and Invoicing software, respectively. AvidXchange also picked up another round as recently June 2017. As reported by FinTech Global, the invoice processor received another triple-figure investment in the form of $100m of growth equity investment from Canadian pension major, Caisse de d?p?t et placement du Qu?bec.
- No one sub sector has a dominant share of the funding in the sector, with the most frequently funded sector, Accounting, only 14.7 percentage points higher than the least funded sub sector, Invoicing.
North America share of Infrastructure & Enterprise Software funding fell sharply in 2016 before rallying in Q1 2017
- North America funding share fell 38.6% YoY in the 2014-2016 period, from 92.6% in 2014 to 54% in 2016.
- Europe and Asia both saw their share of funding (as well as aggregate funding) rise YoY in the 2014-2016. Europe share was a quarter of the overall amount in 2016, compared with a meagre 1.9% in 2014. For Asia, the share of funding rose to a fifth of the overall amount in 2016, a 17.7 percentage point rise from 2014 figure of 2.3%.
- Q1 2017 saw Asia lose a large proportion of its share of funding in the sector, falling to below 1% for the first time.
- The funding share that went to regions outside the three main continents was $15.4m in Q1 2017 equivalent to a 3.5% market share of funding. This share is over three times what the same regions managed in the whole of 2016.
