PitchBook-NVCA Venture Monitor finds 2017 Venture Capital Investment Could be Highest in a Decade
Venture capital 3rd quarter results suggest both good and not so good news for startups and early stage companies seeking funding, based on the latest published statistics in the 3Q 2017 PitchBook-NVCA Venture Monitor. The report indicates that so far this year venture-backed companies have received so much investment in 2017 that the total dollars for the year is on track to exceed or match 2016’s figures, and potentially become the highest in a decade. In the third quarter of 2017 alone, 1,699 venture-based companies received $21.5 billion from venture investors, bringing 2017 total investment to date to $61.4 billion.
However, with this increase in funding also came an increase in aggregate deal value, rising 40% compared to the third quarter of 2016, attributable in part to an increasing number of late-stage deals that account for over 20% of the total deal count. The amount of late-stage deals has not been this high since 2012, and comes at the cost of seed and angel investments which fell below 50% for completed financings for the first time within this same period. This trend has been present throughout all of 2017, with late-stage companies and unicorns raising record amounts of funding and delaying exits.
This larger pool of private funding has pushed the total number of exits, as well as their value, downwards, with 530 venture-backed exits in 2017 so far which is on track for 707 exits by year end—in comparison to 2016’s 839 total exits. Even with unicorn exits acting as a buoy for total exit value, total exit value is on track to be the lowest since 2013, with total IPOs dropping from 19 in the second quarter of 2017 to only 8 in the third quarter. Offsetting the decrease in IPOs is an increase in private equity firms purchasing venture-backed companies.
PitchBook’s CEO, John Gabbert, talked about these findings in a press release, saying that, “Venture Capital activity remains healthy, following the cyclical nature of fundraising and capitalizing on promising investment opportunities for fund managers. We’ve seen a noteworthy uptick in PE buyouts as well as the formation of a special purpose acquisition company launched by Social Capital and Hedosophia with the common goal of purchasing a unicorn tech company. Fund managers will have interesting routes to create liquidity and return funds to investors moving forward.”
