The first quarter of this year was huge for venture capital funding and for VC-backed initial public offerings. So huge in fact, that it's starting to look like the beginnings of a bubble, said Anand Sanwal, CEO and co-founder of CB Insights, a venture capital database.
Venture capital funding hit its highest point since 2001 in the first quarter at $9.99 billion across 888 deals, according to CB Insights' "Venture Activity Report" published Thursday. Venture-backed Internet deals accounted for almost half of all deals and funding in the quarter, with computer hardware and services and mobile following suit.
"Most of this frothiness is tech-centric," Sanwal said. "The biggest thing is these new billion dollar-valued companies and the rise of these mega-rounds. It was almost weekly that we saw a $100 million round. It's happening so frequently."
In the first quarter of 2014, 11 VC-backed U.S. tech companies got enough money in their first-financing round to be valued at $1 billion or more. By contrast, it took all of 2013 to reach that level, according to CB Insights' data.
"We don't see as much of this billion dollar-valuation stuff happening in other sectors. It's a bit of an anomaly," Sanwal said.
With 35 VC-backed IPOs, the first quarter of 2014 also marked the best quarter since the third quarter of 2000 for VC-backed companies going public. Not to mention that there were also 174 M&A exits of venture-funded companies. The tech sector accounted for 37 percent of the venture-backed IPOs and 74 percent of the M&A action.
But the momentum can't last forever, and given that tech stocks have taken a hit recently, the hot IPO market may begin to feel the pressure.
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"A lot of this can be driven by public markets, especially on the IPO side, but given the pullback in tech stocks, if that continues it makes it difficult for prospects looking to IPO," Sanwal said.show chapters
"There's these other macro factors that are going to drive that. If the market was going to be on the upswing, like it had been before the declines, then sure, the momentum would have continued. But things never go up forever, now we just have to see if it stays this way."
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While it's too soon to tell if public markets' appetite for IPOs will continue to be as strong as it was in the first quarter, there's little sign that M&A activity will slow down anytime soon, said Rob Fisher, PricewaterhouseCoopers' U.S. technology deals leader.
Cash-flush tech companies will continue to acquire because they have the money and because their rivals are innovating quicker than ever, so they need to buy smaller companies to stay competitive, Fisher said.
"We are in the midst of some economic conditions mixed with significant shifts in tech that are almost the perfect sunny day for M&A," Fisher said. "All the conditions are there to have a significant uptick in tech deals."
—By CNBC's Cadie Thompson.