The Washington region witnessed its second major investment in less than two weeks Friday when Herndon-based K12 landed $125 million from a Silicon Valley venture capital firm to help the online education company expand its reach.
The deal comes just more than a week after LivingSocial, the District-based daily deal provider, took on $400 million from investors in an effort to push a new instant-deals product into its ever-growing list of markets.
Venture rounds that exceed $100 million are not common in the Washington region, particularly after an economic downturn that left many venture capitalists with limited funds and conservative investment strategies.
But the banner deals have spawned a sentiment among investors that the post-recession market is ripe for new ventures. Many desire to tap into the success of companies such as LivingSocial that in only a few years have raised hundreds of millions of dollars on multibillion-dollar valuations.
“There are great success stories, I think, that give people more confidence and show people on the outside that we’ve got something here,” said Julia Spicer, executive director of the Mid-Atlantic Venture Association. “I know I get an uptick in calls when we have something happen like that.”
But confidence and interest may actually be translating to deals.
Twenty-two local companies attracted seed or early-stage investments in the first quarter of the year, representing more than half of the total number of venture capital deals completed in the region during the three-month period.
Though one quarter does not a trend make, the report, which was published by PricewaterhouseCoopers and the National Venture Capital Association, lends weight to what several investors said they are experiencing in their own firms.
New Atlantic Ventures in Reston last week invested $1.5 million into Scoutmob, an Atlanta-based business that offers daily deals on mobile phones using a slightly different business model than Groupon and LivingSocial.
“Everybody is trying to capture those dollars, and those companies have tremendous revenue tractions,” said Thanasis Delistathis, a managing partner at New Atlantic Ventures.
National venture capital data show that many investors still favor late-stage deals that promise quicker returns. That is largely symptomatic of the economic downturn, when many companies had capital tied up in ventures with no viable means of exit, such as an initial public offering.
“Do we hope the market still continues to improve? Absolutely,” Spicer said. “We don’t have everything singing along and it’s not 1999, but a great deal of positive indicators are starting to surface.”
Investors said that while they were hesitant to act in the past three years, entrepreneurs continued to innovate. As a result, the number of business ventures now prime for investment is strong.
“The level of activity compared to 2000 or so is down, but the level compared to a year or two ago is up,” said Art Marks, managing general partner at Valhalla Partners. “It’s not just the opportunities but the willingness. [Investors] have made a determination that they’re going to get into that and ride the next wave of innovation.”