U.S. Venture Capital Industry Pacing for Another Record-Breaking Year in 2018

To download the full report and data packs, please click here. PitchBook and NVCA will also be hosting a webinar in partnership with Silicon Valley Bank, Perkins Coie and Solium, on April 17 from 9:00 – 10:00 am PDT. Please click here to register.

"The first quarter of 2018 picked up right where 2017 left off, with the largest amount of capital deployed into venture-backed companies in a single quarter since 2006, marking a very strong start to venture investment this year," said Bobby Franklin, President and CEO of NVCA. "As we look ahead to the rest of the year, 1Q appears to be indicating a strengthening exit environment, which would bring liquidity to LPs and could lead to an uptick in fundraising, and in turn lead to even higher levels of investment activity. All of which means that venture investors are well-poised in 2018 to continue investing in and supporting the growth of young, innovative companies that strengthen the U.S. economy."

"While median time to exit has certainly increased, we've noticed VCs have distributed capital back to LPs at a record pace, which is reflective in the larger exits that have come to market," said John Gabbert, founder and CEO of PitchBook. "The venture industry is poised to continue its healthy pace of dealmaking, especially when combined with the increased participation of non-traditional investors and the boost in pre-seed capital. The IPO market is particularly intriguing with several mature, cash efficient businesses gearing up for a public debut. We expect these players will be well received in the public markets."

Fundraising Activity
By quarter's end, venture fundraising paced below 2017 levels with $7.9 billion committed across 54 vehicles. The dip can be traced back to the continued demand for micro-funds (vehicles smaller than $50 million) with niche strategies or regional focuses, which made up half of the total number of funds closed in the first quarter. This emphasis on micro-funds caused a decline in median fund size – down from $50 million in 2017 to $38 million in the first quarter of 2018. Despite the overall decline in capital raised and fund count, fundraising is expected to gain momentum in 2018 on the heels of several $1 billion-plus funds closed in the first quarter and more in the pipeline. Vehicles over $1 billion made up 36% of total capital raised in 1Q 2018 led by Norwest Venture Partners' $1.5 billion fund, General Catalyst Partners' $1.37 billion fund and Battery Ventures' $1.25 raised across two complementary vehicles. Khosla Ventures, Sequoia, Lightspeed Venture Partners, and Social Capital have all announced intentions to raise funds of $1 billion or more in the coming months.

Investment Activity
Investors hit the ground running in 1Q 2018, deploying $28.2 billion in venture-backed companies across 1,683 deals – the highest amount of capital deployed in a single quarter since 2006. At quarter's end, there were 113 financings over $50 million, representing 14% of total deal value and the first quarter to surpass 100 financings over $50 million. What's more, the median deal size took the largest jump PitchBook has tracked. The average early stage deal was 65% larger compared to 2017, while the average late-stage deal tracked 42% higher than 2017's year-end figure. Continued investment in unicorns (venture-backed companies valued at $1 billion-plus) played a role in elevating late-stage deal sizes. In 1Q 2018, 17 unicorns attracted a combined $5.2 billion net new capital, accounting for 18% all capital invested in the US last quarter. The larger deal sizes make sense due to the rise in median age of companies raising rounds at each stage – the median age of companies raising a seed/angel round has hit three years old and eight years for late stage rounds.

Exit Activity
Larger deal sizes in late-stage VC have enabled companies to extend cash runways and decrease the sense of urgency to exit. Consequently, the exit market continued its sluggish run in 1Q 2018, with $8.1 billion in disclosed exit value across 188 reported deals – the lowest exit value and count since 1Q 2013 and 4Q 2011, respectively. In the first quarter of 2018, there were 144 venture-backed M&A transactions, down from 179 acquisitions the same time last year. Amazon's $1.2 billion acquisition of smart security device company, Ring, was the largest acquisition of the quarter. Additionally, there were 15 venture-backed IPOs in 1Q 2018, led by storage platform Dropbox's public debut, which raised $756 million. Since Dropbox's IPO, several unicorns have since filed for IPO including DocuSign and Pluralsight. Looking ahead, the strong IPO market, coupled with the new tax reform legislation, has fueled a growing sense of optimism for a strengthening exit market in 2018.

The full report will include the following components:

• Executive summary
• VC investment activity by stage (Angel & Seed, Early and Late)
• Solium: Cap table analytics can provide transparency to an opaque industry
• Perkins Coie: Key points for client capital needs and liquidity in today's venture landscape
• VC investment activity by first financings, sector and median size
• SVB: Advanced manufacturing: Can a cobot help you with that?
• Corporate VC
• Q&A: As tech disrupts traditional industries, corporations join the VC fray
• Growth Equity
• SVB: What public market fluctuations signal for venture dealmaking
• Exits by type, size & sector
• Fundraising by size & first-time funds
• League tables

About PitchBook

PitchBook is a financial data and software company that provides transparency into the private and public capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York and London and serves nearly 15,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

About National Venture Capital Association

Venture capitalists are committed to funding America's most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth.  As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment.  As the venture community's preeminent trade association, the NVCA serves as the definitive resource for venture capital data and unites its member firms through a full range of professional services.  For more information about the NVCA, please visit www.nvca.org.

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