SEATTLE – April 9, 2019 – After setting an all-time high in 2018, VC investment maintained its momentum in the first quarter of 2019, according to the PitchBook-NVCA Venture Monitor. The quarterly report is the authoritative source on venture capital activity in the US entrepreneurial ecosystem and is jointly produced by PitchBook and the National Venture Capital Associate (NVCA), with support from Silicon Valley Bank, Perkins Coie and Solium. For the first time, the report includes a new section on venture investment in US-female founded companies, which will be a recurring section in all future reports. Continuing the developments of the past few years, larger deals drove elevated total capital investment across fewer transactions as valuations have again climbed to unprecedented levels. These ongoing trends are largely due to increased investor competition and the prevalence of mega-funds (VC funds over $500 million). Corporate VC activity as a share of overall VC activity reached a new high, doubling over the past six years and underscoring the heightened role that CVC investors are taking in large rounds at later stages. The exit market retained some of its momentum from 2018, with outsized liquidity events driving quarterly exit value higher. Lyft’s IPO and six VC-backed acquisitions over $650 million helped to carry exit value in 1Q 2019, with a host of upcoming outsized IPOs poised to buoy exit value throughout the year. Fundraising in 1Q cooled compared to 2018 levels but appears primed to accelerate throughout the year as several prominent firms are on the road with new vehicles seeking at least $1 billion.
To download the full report and data packs, please click here. PitchBook and NVCA will also be hosting a webinar in partnership with Silicon Valley Bank, Perkins Coie and Solium, on Tuesday, April 30, 2019 from 9:00am – 10:00am PDT. Please click here to register.
“Despite uncertainties around the sustainability of 2018’s record VC activity levels, the first quarter of 2019 bolstered healthy figures and is on track for another strong year,” said John Gabbert, founder and CEO of PitchBook. “Investors continue writing larger checks to more developed startups, allowing late-stage companies the choice of operating in either the public or private market after weighing liquidity against transparency. When it comes to liquidity, there are several highly anticipated technology IPOs around the corner, and it will be vital to watch how private market valuations translate to the public markets.”
“Investment momentum from 2018 continued in the first quarter of 2019, and the industry naturally has a close watch on the big tech IPOs this year. However, much of the focus remains on investing in the new wave of successful companies—across many sectors and across the country—building the next big thing, whether that’s in areas like cybersecurity, robotics, applications of AI & ML, cancer treatments, neuroscience, or medtech,” said Bobby Franklin, President and CEO of NVCA. “At the same time, policy continues to affect the industry in a major way, as the early 2019 government shutdown likely delayed the string of expected VC-backed IPOs. Other policy areas like foreign investment rules implemented via the FIRRMA legislation pose a challenge to fundraising from foreign LPs and capital from foreign co-investors into startups, and the administration’s immigration policy continues to push away the best and brightest entrepreneurs to more welcoming countries.”
By quarter’s end, investors deployed $32.6 billion in VC funding across 1,853 deals, a 10.5% increase in volume and a 22.5% decrease in count compared to 1Q 2018. Angel & seed deal value reached $1.9 billion in the first quarter, but saw the greatest decline in deal count among investment stages, falling 44.2% between 2015 and 2018. The largest angel & seed stage deal of the quarter was a $37.0 million investment in bikesharing company, Wheels. Coming in at 34.6x larger than the median deal size in 1Q, the Wheels deal highlights the continued and intense investor interest in the mobility space. Early-stage startups saw $9.3 billion invested across 487 deals in 1Q, bringing the median size of early-stage financings up 36.0% YoY to $8.2 million. Late stage investments totaled $21.4 billion across 538 deals in 1Q 2019, marking the second consecutive quarter in which late-stage capital investment surpassed $20 billion. Robust mega-deal activity contributed an outsized 52.2% of total late-stage deal value, up from 45.7% in 2018. The convergence of the private and public markets continued in 1Q 2019, with more than four VC mega-deals closing for every VC-backed IPO. On the corporate VC (CVC) side, CVC investors participated in 316 venture deals in the first quarter, totaling $19.4 billion, maintaining momentum from the rapid growth of 2018.
The venture-backed exit market retained some of its momentum from 2018 through the first quarter of 2019, as exit value reached $46.7 billion across 137 deals. While slightly lagging last year’s pace in terms of exit volume, outsized liquidity events drove quarterly exit value higher. Acquisitions propelled the highest quarterly value since 4Q 2014 and saw six deals closed over $650 million in 1Q 2019. The largest acquisition this quarter was SAP’s acquisition of Qualtrics for $8 billion, an extension of the strength seen in enterprise software deals over the past few quarters. On the IPO front, the US government shutdown contributed to a slow first quarter for VC-backed IPOs, with only 12 public listings closed in 1Q 2019. Healthcare businesses notched 9 out of the 12 IPOs during the quarter, led by Alector, a developer of drugs to combat neurodegeneration, which debuted at a valuation over $1 billion. Kicking off a long list of upcoming technology IPOs, ridesharing giant Lyft completed its IPO in 1Q. This deal on its own, which valued the company at $21.7 billion on a pre-money basis, was nearly greater than all other exits in the quarter combined.
VC funds raised $9.6 billion across 37 vehicles in 1Q 2019, as the record-breaking activity from 2018 cooled early in the year. Fund count in the first quarter stayed nearly flat YoY, though larger funds were raised. 31.4% fewer funds were raised in 1Q 2019 than 1Q 2018, suggesting that the number of funds raised may decline in 2019 even if capital raised increases. Despite the slowdown, 1Q 2019 continued 2018’s trend of the VC mega-fund. Five VC mega-funds closed in 1Q 2019, headlined by Technology Crossover Ventures’ $3 billion TCV X. The highest growth in 1Q 2019 came from funds sized $250 million to $500 million. From 2011 to 2017, these VC funds comprised less than 20% of fund volume. This fund size comprised 20.5% of funds raised in 2018 and increased to 30.8% in 1Q 2019 across eight vehicles. Several prominent firms, including Khosla Ventures, Andreessen Horowitz, New Enterprise Associates and Vivo Capital, are on the road with new vehicles seeking at least $1 billion.
The full report will include the following components:
- Investment activity by stage
- SVB: Claire Lee talks early-stage venture
- SVB: How life sciences accelerators drive innovation
- Deals by region and sector
- Solium: Avoiding common cap-table pitfalls
- Spotlight: Mobility tech
- Female founders
- Corporate VC
- Perkins Coie: Navigating late-stage financings
- League tables
To download the full report, click here.
“The abundance of capital prevails, though it remains concentrated in a handful of cities and sectors. While US VC investment hit a record high of $132.1 billion invested in 2018, about 65 percent went into larger and later-stage deals. First financings declined. That said, it is a founder-friendly fundraising environment. SVB clients illustrated this: One-third of our clients that raised a Series A in 2018 were formed within a year of that raise and the majority of the remaining two-thirds formed within two years.”
“The first quarter of 2019 was a robust start to the year for the life science side of the industry. The IPO market continues to be strong for life science startups, especially for biotech companies. While cancer therapeutics, gene therapy and rare diseases continue to be the leading types of life science companies receiving funding, we are seeing exciting new companies in the fields of neuroscience, immunology and the convergence of digital and biology. As 2019 continues, these will be some dynamic areas of the life science sector to keep an eye on.”
Matt Stapleton, Head of Shareworks Startup at Solium
“As the trend for companies to remain private longer continues, we are about to see some of the highest profile VC-backed companies of the past decade make their move in to the public markets. How they are received by public investors will have a substantial impact on the activity of late-stage and growth investors going forward. How the business models of marketplace and gig economy companies get valued in the public markets will also have an impact on the valuations late-stage private companies are able to attract. We may see a fundamental shift in the investment pace of late-stage companies in the latter half of 2019 depending on the success of these IPOs.”
“Funding trends we saw in Q4 2018 have all but continued, despite an expectation by some that we’d see a cooling off of activity. There is still pent up demand at pre-seed/angel stage for entrepreneurs who need their initial financing to get a startup off the ground. But all other stages have benefited from a large influx of capital, and are able to raise increasingly large rounds. High valuations and high velocity are still common characteristics.”