Venture Activity Holds Steady with Over $21.78 Billion Invested in Close to 2,000 Companies in Second Quarter

"Venture investment activity the last few quarters supports evidence from the field that the industry is in the middle of a self-correction as valuations come down and the marketplace cools off," said Bobby Franklin, President and CEO of NVCA.  "That's not to say investors are retrenching, but rather returning to a steadier pace of investing.  With $130 billion in capital raised since 2014 and the IPO market for venture-backed companies strengthening, the dynamics of the industry are healthy and venture investors are in a strong position to support the growth of the next generation of innovative companies."

"As venture capital returns to normal, strong fundraising levels indicate a continued belief in the asset class, further evidenced by first-time venture fund managers on pace to receive the highest dollar amount in a decade," said John Gabbert, Founder and CEO of PitchBook. "On the exit side, as we enter the second half, the exit environment looks promising; we have already seen five so-called unicorn companies go public – a record – with more filings on deck to bring much needed liquidity."

Fundraising activity

Following three consecutive years of strong fundraising activity, including a ten-year high of $41 billion raised in 2016, venture capital continues to draw strong interest from Limited Partners seeking outsized returns by supporting the growth of innovative companies.  In the second quarter, venture investors raised $11.4 billion across 58 funds, including the notable fundraise of $3.3 billion by NEA, the biggest venture fund on record.  While the pace of the number of funds closing is down from recent years, it is still high relative to the past decade, with a total of 119 funds closing year to date to raise a total of $19.14 billion through the first half of the year.  First-time funds continue to find success, with 15 funds closing on $1.5 billion in the first half of the year, a pace that could see the highest level of capital raised for first-time funds in the last decade.

Investment activity

In the first half of 2017, 3,876 venture-backed companies raised $37.76 billion, after $21.78 billion was deployed to 1,958 companies in the second quarter alone.  On a quarter-over-quarter basis, capital invested in venture-backed companies is up by 36 percent, while the number of companies receiving investment is stable.  The upswing in total capital deployed alongside a stable number of companies receiving funding can be attributed, in part, to a concentration of capital into a handful of late-stage companies.  Collectively, the top ten deals of the quarter accounted for $4.3 billion, representing 20 percent of all dollars invested for the quarter.  Another reason for this trend is the decline in the number of angel and seed stage investments witnessed over the last several quarters.

Exit activity

While Q1 IPO activity got off to a slow start with just 8 companies listing publicly, the second quarter showed the IPO window opening with 19 companies going public, including five Unicorns. However, there are some cautionary notes amidst the more robust second quarter activity.  The IPO market was led by San Francisco-based Okta and Palo Alto-based Cloudera – which went public at a significant discount to its last private round of financing.  Between Cloudera's valuation discount and the post-IPO performance of another unicorn, Blue Apron, private companies waiting in the wings may think twice about rushing to a public listing.

Additional findings in this report include:

• VC investment activity by round size
• VC investment activity by stage (Angel & Seed, Early and Late)
• VC investment activity by first financings, sector and median size
• Exits by type, size & sector
• Fundraising by size & first time funds
• League tables

Download the Q2 2017 PitchBook-NVCA Venture Monitor and XLS Data Pack here.

About PitchBook

PitchBook is the premier provider of data on the public and private equity markets.  Through its flagship product the PitchBook Platform, PitchBook arms over 11,000 professionals with unprecedented insight into the flow of capital across the entire venture capital, private equity and M&A landscape.  The award-winning web-based Platform features a powerful suite of integrative technology that meets the diverse, data driven needs for professionals to capitalize on opportunities in the private markets.  Founded in 2007, PitchBook is now a Morningstar company.

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.

SOURCE PitchBook