Internet and software investing hit peaks in 2014

Venture capitalists poured more money into Internet and software startups last year than they have since the height of the dot-com boom in 2000.

They also funneled substantial sums to financial services, media and hardware companies, according to a year-end report on investment trends from PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters.

The quarterly MoneyTree Report, released in early January, found that VC dollars going to U.S.-based startups rose 61 percent last year to $48.3 billion, mirroring the findings of a Dow Jones VentureSource study released the same week.

The investment total was the largest since 2000, the year before the bubble burst and just before the U.S. economy went into a tailspin.

Last year’s investing was driven by a surge of money going to big-dollar expansion and late-stage transactions. For the first time, two deals exceeded $1 billion. Both were rounds in which Uber Technologies raised $1.2 billion.

There also were more than 40 “megadeals,” where more than $100 million was raised by Internet and software startups, also a first, the MoneyTree Report found. This pushed expansion-stage investing up 102 percent for the year to $19.8 billion, or to 41 percent of the total.

What is interesting is where the money went. Funding for software companies, the biggest category of venture investing, rose 77 percent to $19.8 billion. Internet investing climbed 68 percent to $11.9 billion, even though the deal total dropped 6 percent.

Other categories saw investments accelerate even more:

• Retail and distribution investments rose 265 percent;
• Computers and peripherals rose 132 percent;
• Electronics and instrumentation rose 128 percent;
• Financial services rose 109 percent: and
• Media and entertainment rose 93 percent.

Biotech, traditionally the second largest category of investing, saw $6 billion dispersed to startups, an increase of 29 percent from 2013.