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2Q 2018 Venture Capital Activity Report

By July 11, 2018Commentary

Time to check in again on the status of venture world, which is an important factor in the establishment and growth of new health care and other companies.  The National Venture Capital Association, in conjunction with other groups, puts out regular reports on this activity.   (NVCA Report)  In the first half of 2018, a whopping $57.5 billion was invested in almost 4000 financing rounds.  If continued for the full year, that will the highest amount of investment ever.  Deal count, however, is down, and round size is up.  There were 94 financings of at least $100 million.  That increase in deal size is being seen even at the earliest stages of a company, with angel rounds having a median raise of $830,000 and seed ones a median of $2.1 million.  There were 800 angel and seed investments and 947 first venture financings across all company stages, with a total value of $5.4 billion.  Early stage companies got $11.5 billion, with an average value of $18 million; while late stage firms raised $15 billion in 475 deals.  Across all stages, number of financings was down and round size was up.

The coasts dominate funding, with the West Coast getting 40% of deals and 62% of money invested, while the upper East Coast regions got 31% of rounds and 26% of total financing.  Software is by far the single highest industry sector in both deal count and funding amount, but health care across all its subsectors is not far behind.  Life sciences alone saw $12.6 billion invested in about 600 transactions.  Areas like cell therapy, immunotherapy and diagnostics are particularly hot.  There were 419 exits of venture-backed companies in the first half, for a total value of $28.7 billion.  This included 43 initial public offerings with a $6.3 billion valuation.  The IPO market has picked up in the first half, while M & A exits have been slower.  157 funds closed fundraising with a total of $20.2 billion in commitments, including 8 funds that raised over $500 million.  So venture activity is strong across the life cycle of companies.  But part of what this means is too much capital, meaning some dumb investments are being made.  And in health care, it means high expectations for returns, which means higher prices for health care payers and patients.

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