Venture capital funds had an expensive first quarter of the year, investing US$32.6 billion, the second highest quarter in the last decade, according to data from Pitch Book and the National Venture Capital Association.
But that capital is going towards a smaller number of deals, with the quarter’s spending going towards just 1,853 deals, a 22.5 per cent decrease in count compared to Q1 2018.
Larger deals continued to elevate total deal value, with transactions at US$50 million or higher taking up more and more of that total.
“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 chief executive officer of PitchBook, in a press release. “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.”
Angel and seed deals totalled US$1.9 billion, with 828 deals done, compared to a peak of 1,483 deals in Q1 2015. “Despite the decline, capital invested has remained at an elevated level as angel and seed investors place ever-larger bets on the most-favored startups,” the report said. “Additionally, many startups are tapping alternative sources of capital, such as crowdfunding or skipping straight to an institutional round, instead of pursuing an angel or seed round.”
Early-stage startup deals totalled US$9.3 billion invested across 487 deals, while late stage investments came to US$21.4 billion across 538 deals.
“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,” said Bobby Franklin, president and chief executive officer of the NVCA. “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.”