WASHINGTON, DC – The U.S. venture ecosystem ended 2018 with more than 8,300 companies across the country receiving venture funding, approximately 1,000 venture firms managing nearly 1,900 active venture funds, and more than $400 billion in venture capital (VC) assets under management (AUM), according to the National Venture Capital Association (NVCA) 2019 Yearbook released today. The Yearbook is an annual publication documenting trends and analysis of venture capital activity in the U.S. from the past year and capturing historical data and information about venture’s role in fueling entrepreneurship in America.
In 2018, high-growth startups in all 50 states and the District of Columbia, 222 Metropolitan Statistical Areas (MSAs), and 393 Congressional Districts raised capital to build and grow their companies. Total capital invested in the U.S. last year reached $131 billion and buoyed global total venture capital investment to $254 billion, record-highs both domestically and internationally. The U.S. share of global venture investment has held steady around 50% the past three years—51% in 2018—well below the 84% global share in 2004 and 90%+ share in the 1990s.
“A growing venture ecosystem with more capital is a positive sign for entrepreneurs in the U.S. who are building the next big thing, whether that’s in FinTech, EdTech, or AgTech sectors, for life-changing therapies to treat patients, or to make services more accessible to consumers,” said Bobby Franklin, President and CEO of NVCA. “Ensuring that policies encourage new company formation and that the U.S. continues to be the most attractive country for an entrepreneur to start and grow their company remain core to our advocacy efforts. In addition to our policy efforts, NVCA continues to expand our programs—such as education, best practices, and diversity and inclusion—to ensure the health of the industry.”
Highlights of the U.S. Venture Industry in 2018
- At the end of 2018, 1,047 venture firms were in existence, defined as a rolling count of firms that have raised a fund in the last eight years. These 1,047 firms managed 1,884 venture funds and had approximately $403 billion in U.S. venture capital assets under management (AUM) and $100 billion in dry powder at the end of 2018.
- Most firms (744 firms or 57% of firms) managed less than $100 million at the end of 2018.
- Venture capital investors raised $54 billion across 256 funds to deploy into promising startups, marking the fifth consecutive year of $35 billion or more raised. The overall U.S. median VC fund size in 2018 was $75 million, a ten-year high and 50% larger compared to 2017.
- More than 8,380 venture-backed companies received $131 billion in funding in 2018, eclipsing the $100 billion watermark set at the height of the dot-com boom in 2000. Though the number of first-time financings (i.e., first round of equity funding in a startup by an institutional venture investor) continued to decline in 2018, the 2,040 companies raising first-time funding attracted a 15-year high of $10.1 billion.
- In 2018, 85 venture-backed IPOs raised $63 billion, the highest aggregate annual total for capital raised since the dot-com boom except for 2012 when Facebook went public. The number of disclosed mergers and acquisitions (M&As) have continued their dip since 2014, with 779 M&As in 2018 and far from the peak of 953 in 2014. However, last year’s 199 M&As with disclosed values represented a total of $58.4 billion in disclosed exit value, the highest since 2014.
Venture Across the Country
- VC assets remain geographically concentrated in three states—the dominant hubs for venture activity—California, Massachusetts, and New York. These three states together made up more than 85% of total U.S. VC AUM in 2018.
- Last year, 34 states witnessed increases in their VC assets under management from 2017 to 2018, and 31 states had more than $100 million in AUM at the end of 2018.
- Outside of California, Massachusetts, and New York, median VC fund size reached $25 million, a continued increase since 2014, mirroring the overall increase in U.S. VC fund sizes. Funds in those states, however, still remain relatively small compared to the dominant venture fund hubs – the median fund size for California, Massachusetts, and New York collectively was $100 million in 2018.
- Venture funding reached startups in all 50 states and the District of Columbia, 222 Metropolitan Statistical Areas (MSAs), and 393 Congressional Districts.
- Charleston, SC, Richmond, VA, and Indianapolis, IN saw the biggest growth rate (i.e., compound annual growth rate) for annual number of VC investments over the past five years (for those MSAs with at least 15 in 2018). Indianapolis, IN, Columbus, OH, and New Haven, CT saw the largest annual growth for VC investment over the past five years (for those MSAs with at least $10 million VC investment in 2013 and 2018).
- Companies headquartered in California, New York, or Massachusetts accounted for 59%, 11%, and 9%, respectively, of overall U.S. venture capital investment last year. These three states collectively garnered $103 billion and accounted for 79% of total U.S. venture dollars invested in 2018, a 15-year high in both absolute and relative terms.
- More than 4,100 companies headquartered outside California, New York, or Massachusetts attracted an aggregate of $27 billion, representing 46.5% of VC deal count in 2018 and the highest share since 2010.
U.S. Venture Capital in the Global Context
- The U.S. helped steer global venture record highs of $80 billion in fundraising, $254 billion in investment, and $308 billion in exit value for venture-backed companies in 2018.
- The U.S. share of global fundraising has remained strong and last year accounted for two-thirds of total funds raised.
- The U.S. share of global venture investment has hovered around 50% the past three years (reaching 51% in 2018), well below the 84% global share in 2004. By deal count, the U.S. attracted 58% of the global total in 2018, compared to 76% in 2004.
- The U.S. accounted for 40% of total capital exited in 2018, dipping below 50% for the first time.
NVCA in Action in 2018
- Fought to make key changes to the Foreign Investment Risk Review Modernization Act (FIRRMA) foreign investment bill (and the regulations implementing the bill) to protect investment in U.S. startups.
- Continued to defend and fight for full implementation of the International Entrepreneur Rule while also working to pass a Startup Visa into law.
- Made recommendations to policymakers and regulators to reform the Volcker Rule to allow banks to invest in VC funds again.
- Co-hosted the first annual Stanford/NVCA VC Symposium in March in Palo Alto, providing practical education for VC professionals.
- Unveiled a variety of resources to help address sexual harassment in the venture ecosystem.
- Hosted its first two LP Office Hours events to educate new and aspiring VC investors from diverse background on the fundraising process and working with limited partners (i.e., investors in venture funds).
- Released updated Model Legal Documents addressing cryptocurrency and sexual harassment & discrimination.
About the NVCA Yearbook
The annual NVCA Yearbook, now in its 22nd year, documents trends and analysis of venture capital activity in the United States and information about venture’s role in fueling entrepreneurship in America. The Yearbook provides statistics on the size and impact of the U.S. venture industry, investments into startups, capital raised and managed by venture capital firms, and exit activity either thorough an initial public offering (IPO) or merger and acquisition (M&A). It also offers an overview of what venture capital and how it works, and the role NVCA plays in advancing the entrepreneurial ecosystem. Data for the NVCA Yearbook is provided by PitchBook, the official data provider of NVCA.