18 charts to illustrate US VC in 2018

January 28, 2019
Over the past couple of years, the term "record-breaking" has frequently been used to describe the state of venture capital in the US, as the space hits new heights with deal value, mega-rounds and fundraising. In 2018, some of these records reached heights not seen since the dot-com boom.

The 4Q 2018 PitchBook-NVCA Venture Monitor takes a detailed look at these trends, breaking down the data by stage, sector, region and more. The full report includes more than 30 pages of analysis, visuals and interviews, but for a look at the highlights, here's a set of some of our favorite charts from the report.

Capital investment into US VC reaches new all-time high

There's no contest for the biggest headline of the year in VC: Capital invested surpassed $100 billion for the first time since 2000. The $130.9 billion invested—more than $12 billion of which was raised by Juul in one fell swoop—smashed the previous record of $105 billion. That figure, recorded in 2000 by Thomson Reuters, is generally considered to be the high-water mark for annual VC invested. Deal sizes and valuations have risen across all stages, which made the new record possible despite a slight decline in deal count.
 

PE involvement strengthens in 2018

Private equity participation in VC deals has picked up over the past decade and remained relatively steady with respect to deal count over the past five years. Deal value, on the other hand, increased sharply in 2018, jumping 50% YoY. PE investors are typically involved in large, late-stage rounds, meaning that more capital-intensive and developed businesses are likelier to reap the rewards of these checks than their smaller counterparts.

 

Activity shifts toward upper size brackets

The flow of capital and the subsequent ability of startups to stay private longer have helped drive up the number and size of the rounds that these companies are raising. Over the past few years, larger rounds have accounted for a greater proportion of overall deal count. In 2018, deals worth more than $25 million accounted for 12.8% of the total (excluding rounds with an undisclosed value), compared with 8.7% in 2017.

 

Mega-round counts doubled in 2018

One factor that helped drive the increased activity at the upper end of the deal spectrum was a spike in mega-rounds. The number of these fundraises (defined as $100 million or more) rose 90% YoY, and the total deal value more than doubled, surpassing $60 billion and accounting for nearly 47% of the total capital invested in 2018.

 

Angel & seed median deal size increased 15% YoY

It was a strong year for deals at the smaller end of the spectrum as well. Angel & seed stage activity neared a decade high of $7.5 billion, largely thanks to a strong 4Q. As startups have been able to delay their fundings, the median age of companies receiving angel & seed funding has risen, and so have the median pre-money valuations and deal sizes. The median seed-stage deal in 2018 reached $2 million, and after several years of remaining relatively flat, the median angel investment size rose 40% YoY.

 

First financings in 2018 fall short of 2017's count

The number of first-financing rounds fell from 2,748 in 2017 to 2,123 last year, a decline of nearly 23%. By contrast, the number of follow-on rounds remained nearly flat, with 6,825 occurring in 2018 and 6,741 occurring in 2017. Overall, the follow-on rounds accounted for nearly 12x the capital as first financings.

 

$25M+ deals now make up 61.2% of deals by value

Deals of $5 million or more accounted for nearly half of all early-stage deals in 2018, and while those of $25 million and above accounted for less than 15% of the overall deal count, they made up more than 60% of the total deal value. More than $25 billion was invested across 373 early-stage rounds.

 

VC hubs outside Silicon Valley see greater proportion of venture investment

In keeping with the trend of recent years, VC activity outside Silicon Valley has remained steady. The West Coast of the US saw less than 40% of the total deal count, while New England, the Mid-Atlantic and the Great Lakes regions accounted for almost the same proportion, with the three combining for 38.6% of the total deal count.

 

Great Lakes and New England only regions to see increased 2018 deal count

The West Coast still takes the lion's share of capital invested, and its proportion of the total value rose YoY. The Great Lakes and New England were the only two areas in the US that saw an increase in deal count, albeit only slightly. The number of deals in the Great Lakes region rose about 3% to just over 800 for the year, and in New England, deal count rose about 1.7% to 852.

 

Software and pharma & biotech continue to dominate dealmaking

When it comes to deals by sector, no others have matched the software and pharma & biotech spaces, which have dominated the space for the better part of a decade. The software sector was far and away the leader in deal count, with more than 3,700 for the year, while pharma & biotech was a distant second with 720. The software sector also saw a record level of capital invested, reaching $46.8 billion in 2018, an increase of 54% YoY.

 

Capital availability fuels further investment in life sciences

The life sciences sector saw its share of deal flow rise last year, with its 1,308 deals accounting for 14.6% of the deal count in VC. Its total deal value rose 40% to reach a decade high and surpass $20 billion for the first time in the past 10 years. Life sciences financings tend to run large, with more than 60% of this sector's capital in 2018 coming from rounds of $50 million or more.

 

Growing proportion of venture deals include corporate investors

Corporate investors participated in 1,443 VC deals in 2018 worth a total of $66.8 billion—an 83% increase YoY in deal value (though that was inflated by Juul's $12.8 billion round). Deal count increased slightly, both in absolute value and in its share of total venture activity, and deal value crossed the 50% threshold for the first time this decade, with rounds including a CVC investor accounting for nearly 51% of total capital invested.

 

Strategics prove an important capital source for outsized deals

Deep-pocketed investors such as SoftBank have helped lead to more outsized funding rounds, as have corporate tax cuts that have helped keep CVC investors' coffers filled. There were 253 deals of $50 million or more that included CVC participation last year, and while that accounts for less than 20% of deal count, it constitutes more than 75% of total capital invested.

 

Exit counts slightly decline in second half of 2018

VC-backed exits had an exceptionally strong year, with more than $120 billion spread across 864 exits. Exit value increased 33% YoY and reached its second-highest annual level of the decade, behind 2012. The exit count dropped in the last half of the year, but exit value had a strong 4Q in particular, largely thanks to big-name exits such as those of Moderna Therapeutics and GitHub.

 

IPOs make up more than half of exit value

Public offerings accounted for more than half of total exit value, despite their share of the total declining slightly relative to 2017. Healthcare IPOs were particularly strong, especially in 4Q, when they made up more than two-thirds of the total exit count, with Moderna's listing representing the biggest biotech IPO ever.

 

Billion-dollar funds constitute growing proportion of VC funds

Last year was a banner year when it came to fundraising. VCs raised $55.5 billion, a 62.5% increase YoY. Larger funds have become more common, as the demand for larger rounds continues to grow. There were 11 vehicles of $1 billion or more, setting a record in that size category. Billion-dollar funds accounted for more than 43% of VC fundraising in 2018, the highest proportion since at least 2006.

 

52 first-time VC funds raised in 2018

First-time funds set decade records for both fund count and total capital last year, with the $5.3 billion raised across 52 funds marking YoY increases of 51% and 30%, respectively. First-time funds are also coming in larger than in the past, with 12 in the $100 million to $250 million range, and four in the $250 million to $500 million range. One reason behind the large first-time closes is the creation of new VC firms as spin-offs of longstanding ones, such as NewView Capital, founded by senior team members from NEA.

 

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