Venture Capital Activity in 2018

Times are rolling and ripping for the venture capital industry–lots of funds raised, lots of capital being invested, good returns on exits.  The latest report from the National Venture Capital Association indicates what a banner year it was.   (NVCA Report)    $130.9 billion was invested in 8948 transactions, the first time over $100 billion has been invested since 2000 and the highest ever.  The number of transactions declined, reflecting larger deal sizes at all stages.  Corporate VCs were involved in about 15% of all transactions.  Private equity firms were involved in about 8% of rounds.   Early and late stage VC funding deal numbers have plateaued for almost 4 years, while angel and seed rounds have declined in number since highs in 2014 and 2015.  Funding of early stage companies, where the real innovation tends to occur, actually declined and 62% of money went to deals of $50 million or more, so well-funded companies typically got even more well-funded.  Unicorns, or companies with billion dollar plus valuations, got 34% of all funding.

Angel and seed rounds received a total of $7.5 billion in about 850 transactions.  Median pre-money valuations rose about 17%.  But the number of first time financings fell.  For early stage VC, the number of transactions declined slightly, while total fundings in 2018 rose.  Median valuation for these rounds rose 26%.  Late stage VC saw a slight uptick in number of financings but a large rise in total dollars invested as there were many quite large rounds.  Investors’ interest in these later stage companies was reflected in a median valuation rise of 45%.  Regionally, the west coast got 39% of deals and 62% of total dollars; followed by the Mid-Atlantic region with 20% of deal count and 15% of dollars.  Health care did very well, accounting for over a third of all transactions, with pharma and biotech companies getting an even higher percent of funding, with several notably larger rounds.

Exit activity was also strong, with large acquisitions of  venture-backed companies and good IPO activity.  A total of $120 billion was returned in 864 exits, a 33% rise in value from 2017.  About half of exit value was in IPOs, and almost 70% of those IPOs were in health care.  In regard to fundraising, firms closed on $55.5 billion in commitments for 256 fund vehicles, the highest in the history of NVCA reporting.  This included 52 first-time funds.  VCs appear to have over $75 billion in available funds, implying that there will be ample capital for new and growing firms.  And health care seems to be doing well as a sector with strong VC interest.