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From Near-Record Levels in 2018, Quarterly VC Funding and Deal Activity Fall This Quarter, According to the PwC/CB Insights MoneyTree Report

 

Highest Number of US Unicorns and Aggregate Unicorn Valuation in Q1 2019


NEW YORK, April 9, 2019
– After 2018 saw the highest annual funding level since 2000, quarterly funding fell 36% this quarter as venture capital-backed companies based in the United States raised $25B across 1,279 transactions, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and CB Insights.

US VC deal activity declined for the third consecutive quarter with over 4% fewer deals compared to Q4 2018. US mega-rounds was also down from a record Q4, but still above historical levels as US private companies raised 46 $100M+ rounds in Q1’19.

Global VC funding and deal activity also fell this quarter as funding fell by 22% to $52B and deal activity fell by 5% to 3,327 transactions. Both funding and deal activity in North America and Asia decreased compared to Q4’18. However, European funding jumped by 48% to $8B amid a 4% drop in deal activity to 724 transactions.

“Over the past three quarters, we’ve seen the number of deals moderate down, while the total amount invested stays relatively consistent. The prevalence of mega deals - characterized as rounds greater than $100 million - continues to shape the VC landscape.”

Tom Ciccolella, US Venture Capital Leader at PwC

Regionally, New York funding doubled to $4B this quarter while California-based companies saw funding fall 53%, from $28B in Q4’18 to $13B in Q1’19. New York deal activity also jumped, up 23% to 201 transactions in Q1’19, from 164 transactions in Q4’18. Deals declined in California and Massachusetts.

"US venture capital-backed companies saw its first decline in both deals and dollars in a long time. For funding, it was the first material decline since Q3'16 and for deals, it was the third straight quarter decrease," said Anand Sanwal, CEO and co-founder of CB Insights. "Investors are shifting away from the earliest and riskiest bets with US seed-stage deal share declining to 24% of all deals vs 30% just a year ago. Mega-rounds, which have buoyed funding levels, were also down this quarter although there still is plenty of money for mid- to later-stage companies."

Key Q1 2019 highlights:

  • US VC deal activity declined for the third consecutive quarter with over 4% fewer deals compared to Q4 2018. US seed-stage deals declined for six consecutive down or flat quarters, to 24% of all deals, their lowest in recent quarters. Early-stage deals decreased slightly to 26%, their first decrease since Q1’18.
  • Corporate participation in US deals increased in Q1’19 to 30% of US deals to VC-backed companies, its highest level in recent quarters.
  • US-based companies saw another big quarter for mega-rounds, raising 46 $100M+ rounds, down from the Q3’18 record but still elevated. Later-stage companies raised several massive rounds in Q1’19, including two $1B rounds raised by coworking provider WeWork and freight forwarding startup Flexport.
  • North America and Asia saw $100M+ deals fall in Q1’19 from record levels in Q3’18 and near-record levels in Q4’18. However, mega-rounds increased to 10 $100M+ rounds in Europe, up from 6 in Q4’18.
  • At 147, the number of US private companies with $1B+ valuations has never been higher. Q1’19 also set a new record for aggregate unicorn valuation as unicorns reached a combined value of $582B in Q1’19. In comparison, unicorns accounted for $63.1B in 2013.
  • Auto tech funding increased drastically in Q1’19 as US auto tech companies raised $1.7B in Q1’19, up significantly from $252M in Q4’18.
  • While funding raised by AI-related companies fell 22% this quarter compared to Q4’18, the second straight quarterly decline, AI deal activity increased to 116 deals after three consecutive quarterly declines.
  • Fintech-related funding remained elevated, falling only 3% after a record Q4’18. US fintech companies raised $3.3B in Q1’19, slightly down from $3.4B in Q4’18. Deal activity rose 13% in Q1’19, to 170 transactions.
  • Amid a slight increase in deal activity, digital health funding decreased 28% in Q1’19 as US digital health startups raised $1.3B. Excluding Clover Health, which raised $500M in Q1’19, all other digital health deals were less than $100M.
  • New York metro-based VC-backed companies raised $4.5B in Q1’19, a 110% increase compared to Q4’18. Late-stage New York companies raised six $100M+ funding rounds, including a $1B Series H round.
  • Globally funding fell by 22% and deal activity fell 5% in Q1’19 as $52B was raised over 3,327 transactions. Asia-based private companies raised $18B in Q1’19, a 12% decrease compared to Q4’18. Deal activity fell 7% to 1,128 transactions, the second-straight quarterly decrease.
  • North America beat out Asia for the third-straight quarter in private companies newly valued at $1B+. North America minted 10 new unicorns, compared to 5 in Asia.

MoneyTree Report results are available online at pwc.com/us/en/industries/technology/moneytree.

CB Insights research can be found online here.

 

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