The FINANCIAL -- The report presents Dow Jones VentureSource’s quarterly findings for U.S. venture capital fundraising, investment, valuation, and liquidity.
Venture Fundrising Decreases in U.S. During 3Q 2018
148 venture capital funds collected $12.81 billion in 3Q 2018, which represents a 27% decrease in the amount raised from the prior quarter and a 9% drop in the number of funds. Insight Venture Partners X LP, a venture capital fund that closed at $6.3 billion, was the largest of 3Q 2018, raising $2.69 billion in its final closing, which accounted for 21% of the total VC financing raised during the quarter.
U.S. Equity Investment Hits All-time Record
Investment in U.S. companies surged 14% in 3Q 2018 from the previous quarter, hitting a new record for the second consecutive quarter. Total funding now exceeds the peak of the first dot-com bubble (1Q 2000) by 17%, although the number of deals is 26% lower compared to that era. Deal volume also fell on a quarter-over-quarter basis, dropping 8%. Median deal sizes actually decreased 14% from 2Q, indicating that the jump in total funding was concentrated in a handful of extremely large rounds. When compared to last quarter, financing rose most noticeably in the Business & Financial Services, Consumer Goods, and Consumer Services sectors; IT and Healthcare fell slightly.
Equity Financings in U.S.-based, VC-baked Companies, by Industry Groups (3Q 2018)
Business & Financial Services companies (which includes SaaS) received the lion’s share of funding in 3Q, taking $7.55 billion across 299 deals. The amount invested was up 21% over the previous four-quarter average, while the number of deals fell 9%. The IT sector dropped to second place, with $7.20 billion in 410 rounds. This represented an increase of 25% in funding but a 5% dip in deal volume compared to the previous four-quarter average. Healthcare companies placed a strong third, securing $6.90 billion through 291 deals. These figures were up 7% and 3% in total funding and deal volume, respectively, compared to the previous four-quarter average. For the year to date, Healthcare is in the lead so far, with a total of $21.30 billion raised across 870 transactions.
Venture M&A and IPO Market Activity in the U.S. During 3Q 2018
In 3Q 2018, deal values for mergers and acquisitions of VC-backed companies declined by 12% when compared with the previous quarter. During the same period, the number of IPOs declined by 32% to a total of 21 listings for venture-backed companies. While this represents a significant decrease when compared with 2Q 2018’s record quarter, it still comes in 163% higher than the number of listings in 3Q 2017. Capital raised decreased by 53% from 2Q, reaching $2.26 billion.
U.S. VC-BACKED M&As (2015-2018)
202 M&As of venture-backed companies in the U.S. collected $33.02 billion during 3Q 2018.
Compared to 2Q 2018, when a total of 190 transactions accumulated $37.48 billion, the number of deals increased by 6% while amount raised decreased by 12%.
The largest deal of the quarter was Cisco Systems’s acquisition of Duo Security Inc. for $2.35 billion, announced on August 2. The deal accounted for approx. 7% of the total amount paid in 3Q 2018 for M&As.
U.S. VC-BACKED IPOs (2015-2018)
21 venture-backed companies raised $2.26 billion through public offerings in 3Q 2018.
Both the number of deals and the capital raised dropped significantly from last quarter.
Tenable Holdings Inc.’s IPO was the biggest listing, raising $250.70 million. The company, now quoted on the Nasdaq Stock Exchange under the TENB ticker symbol, was valued at $2.55 billion.