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Record $100M+ Deal High Drives Funding Increase to US VC-Backed Companies By 17%, According to the PwC/CB Insights MoneyTree Report

 

16 US and 13 Asian Companies Reached Unicorn Status in Q3

Asia Funding Drops Off, Decreasing 11%

NEW YORK, October 9, 2018 – During the third quarter of 2018, VC-backed companies based in the United States saw a 17% increase in funding, bringing up the total dollar amount invested to $28B, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and CB Insights.

Globally, Q3’18 generated record levels of mega round activity of $100M or more, birthing 16 new unicorns in the United States and 13 in Asia. Specifically, US private companies raised 6 $500M+ and 55 $100M+ VC rounds, the most of any quarter on record.

“This quarter approached quarterly funding records, with $27.5B invested in VC-backed startups and 55 mega-rounds. On the other hand, VC-backed deal volume is down to a level unseen since Q4 of 2012. As early-stage startups wonder if there are adequate funds available, the overall deal volume (1,229) still reflects a healthy startup ecosystem.”

Tom Ciccolella, US Venture Capital Leader at PwC

Regionally, in the United States, New York spiked up after multiple flat quarters, rising 110% in Q3’18 to $5.8B, compared to $2.7B in Q2’18. However, San Francisco continued to take the lead in terms of deal share, generating $7.9B across 229 deals. Similarly, Silicon Valley (South Bay) saw an increase in funding by 24% compared to Q2’18, hitting $4.8B in Q3’18.

Global funding activity increased slightly during Q3’18, increasing by 2% to $53.1B across 3,408 deals. Notably, funding to Asian companies dropped by 11% to $19.3B in Q3’18, amid rising VC funding globally. Early-stage deal sizes declined across all regions, as later-stage funding drove funding to record levels. During this quarter, later-stage deal size for Asian companies rose for the second quarter in a row to $100M.

“The unicorn birth rate picked up in Q3’18 with 16 US startups and 13 Asian companies seeing valuations rise above $1 billion dollars. Mega-rounds (those over $100M) also reached record levels in the US as money rushed into mid- and later-stage companies,” said Anand Sanwal, CEO and co-founder of CB Insights. “The casualty of this rush has been the seed stage, which saw a global decline. The migration out of seed won't be felt now, but it will have impacts on the venture ecosystem in the coming years."

Key Q3 2018 highlights:

  • Deal activity in the US declined for the first time since Q4’17, dropping from 1,501 in Q2’18 to 1,229 in Q3’18. Seed-stage deals to US-based companies also dropped from 26% in Q2’18 to 18% in Q3’18, the lowest in several quarters. Median later-stage deal size decreased to $34M in Q3’18, down from $42M in Q2’18.
  • However, US-based companies saw a massive quarter for mega-rounds, recording 55 rounds of $100M+ and 6 $500M+ rounds, the most of any quarter on record. This drove up the overall dollars to VC-backed companies by 17% in Q3’18 over the previous quarter.
  • Late-stage, US-based unicorns continue to raise massive deals. WeWork, Uber, and Peloton all raised $500M+ rounds in Q3’18.
  • 16 US-based companies reached $1B+ in valuation in Q3’18, compared to 7 in Q2’18. New companies achieving a valuation of $1B or more included Lime, LegalZoom, and GitLab.
  • Investment deals and dollars increased significantly for Agriculture Tech companies, jumping up to $508M in Q3’18 after remaining in the $100M range for several quarters. This was due to Indigo Agriculture’s $250M round, accounting for nearly half of ag tech funding in Q3’18.
  • Auto tech funding in the US increased for the first time after several flat quarters. $1.9B was invested across 21 deals in Q3’18, compared to $56M across 13 deals in Q2’18. The funding jump was driven by a $1B investment in Lucid Motors and Zoox’s $500M investment.
  • Globally, $53B was invested across 3,408 deals, a 2% increase in funding amid declining deal activity and a drop in Asia funding. Contrary to the previous quarter, Asia saw a decline in funding, dropping 11% to $19.3B in Q3’18. Deal activity in Asia remained flat at 1,359 deals.
  • Mega-rounds continued to rise significantly in North America and Asia, as both regions saw $100M+ deals hit record quarterly highs, with 55 and 48 deals respectively. New unicorn births also jumped in both regions, to 16 new companies valued at $1B or more in North America and 13 in Asia.
  • Driven by late-stage funding from companies like WeWork, Peloton, and letgo, investment into New York-based startups jumped by 110% to $5.9 in Q3’18. San Francisco (N. Bay) funding also increased by 35% in Q3’18, with $8B invested, despite a sharp decline of 20% in deal activity to 229 transactions. Similarly, Silicon Valley (S. Bay) funding increased by 24% to $4.8B, but deal activity decreased by 28%.
  • After a four-quarter increase, New England saw a drop in funding by 18% in Q3’18, with $2.4B invested across 128 deals. Funding and deal activity in LA and Orange County also declined for the second straight quarter, as investment dropped 53% to $825M.

MoneyTree Report results are available online at www.pwcmoneytree.com.

CB Insights research can be found online here.

 

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©2018 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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