If you were asked how the venture capital (VC) industry performed in 2018, what would you say? Red hot? Slowing? Just starting to boom? Sick of San Francisco?
Private equity and venture capital data provider Pitchbook recently released their accounting of the state of the VC industry at the end of 2018. Here’s a look.
Deal Activity
First up, deal activity. VC activity performed incredibly well in 2018. Overall, according to the Pitchbook-NVCA Venture Monitor, deal value surged to $130.9 billion in 2018, far surpassing the $83.0 billion in 2017.
Interestingly, although deal value ballooned to over $130 billion, deal count dropped a little bit, going from 9,489 in 2017 to 8,948 in 2018. Hmm. Fewer deals but the deals that were made much at a much higher valuation than the prior year.
VC Deal Activity with PE Moves Up
Although typically viewed a frienemies, in 2018 VC deal activity with PE expanded. In 2016, a total of 727 deals worth a total of $25.6 billion involved both VC and PE investment.
In 2018, that amount expanded to 792 deals and $38.5 billion in deal value. Unsurprisingly, it wasn’t just a good year for VC.
The Doubling of the Mega-Deals
One of the findings from the Pitchbook report that comes at very stark is the massive increase in deal value in 2018.
In 2014, deal value totaled only $17.8 billion, with the total number of deals at 82. The 2015, 2016, and 2017 figures were $25.0 billion, $24.2 billion, and $24.6 billion, respectively (109/79/104 deals from 2015 through 2017).
What happened in 2018? Things exploded. The total deal value grew to $61.1 billion, more than double the 2017 value. The number of mega-deal activity also increased, from 104 to 198.
There’s certainly a lot of cash looking for high returns.
Angel and Seed Deal Sizes Jump Again
Two other figures from the Pitchbook report appear telling of where we are with VC in the U.S.
The first is the median angel and seed deal sizes from 2008 to 2018. The median deal size for seed funding increased substantially in 2018, from $1.5 million in 2017 to $2.0 million in 2018, representing a 25% ballooning in value.
On the angel front , deal size increased from $500k to $700k, an increase of 40%.
As with the previous measures, these figures on angel and seed deal size suggest an American economy that is on the lookup for healthy investment deals.
Another Year of Decline for First-time and Follow-on VC Rounds
Although the previous figures were immensely positive on the state of the VC industry, one interesting finding is that both the first-time VC funding round and the follow-on VC funding rounds declined in 2018 after fairly decent figures in 2017.
It’s tough to decipher what this means outside of the obvious that VC may be becoming pickier in what they invest in. Overall, though, first-time and follow-on VC investments are still at very healthy levels compared to historical experience.
Conclusion
Overall, the VC industry ended 2018 are very healthy notes. The industry is on the up, with startup and entrepreneurial activity in the U.S. looking fairly good after years of weakness. Life is good right now if you’re working in the VC industry.
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