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Quarterly Investment to US VC-Backed Companies Increased 4%, Reaching $21.1B, According to the PwC/CB Insights MoneyTree Report

 

Overall US Deal Activity Declined 2%

10 Minted Unicorns in North America and Asia

 

NEW YORK, April 11, 2018 – The first quarter of 2018 saw an increase in funding to VC-backed companies based in the United States with a high number of mega-rounds contributing to the funding growth, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and CB Insights.

While funding to VC-backed companies in the United States increased 4%, reaching $21.1B invested across 1,206 deals, deal activity declined 2%. A high number of mega-rounds contributed to the funding growth this quarter, which was the second-consecutive quarter with over 30 rounds of $100M or more. Q1’18 saw 34 mega-rounds to US VC-backed companies, which accounted for 34% of total funding, but down from 42% in Q4’17. This marks the first decline since Q4’16.

 

2018 looks to continue the trend of larger deals as we’ve now seen two consecutive quarters with over 30 rounds of $100M or more – only the second time in recent history that this has happened. Additionally, the $21B we saw invested this quarter is a record high, just the second time we’ve reached this funding level during the last 15 years, and Artificial Intelligence saw its biggest funding quarter ever (over $1.8B)."

Tom Ciccolella, US Venture Capital Leader at PwC

Several US regions also saw an increase in funding. San Francisco-based companies saw a 23% increase in funding, spurred by 8 mega-rounds of $100M or more. LA/Orange County saw funding jump 97% with $1.9B invested across 101 deals. For the third-straight quarter, New England funding increased, with $2.7B invested across 125 deals.

Despite a 4% decline in deal activity this quarter, global investment reached $46.5B across 2,884 deals. North America and Asia continue to be centers for mega-rounds and unicorns. North America saw 35 mega-rounds in Q1’18, while Asia recorded 29, and accounted for 4 of the 5 top rounds globally. Both regions were each home to five new Unicorns this quarter.

"Early stage deals declined this quarter while mega-rounds, those over $100M, and later stage funding remained strong. This is a trend we have seen the past few quarters,” said Anand Sanwal, co-founder and CEO of CB Insights. "Right now, a lot of the money flowing into venture-backed companies is from large corporates or sovereigns who need to put a lot of money to work at once. This diversion of attention away from early-stage venture is something worth watching as it will have knock-on effects down the line on the venture market.”

Key Q1 2018 highlights:

 

  • The US market saw strong funding growth as dollars to VC-backed companies were up 4% in Q1’18 over the previous quarter with $21.1B invested across 1,206 deals. Deal activity declined for the second consecutive quarter, falling 2%. 
  • As the second-consecutive quarter with over 30 rounds of $100M or more, Q1’18 was another big quarter for mega-rounds. The US saw 34 mega-rounds, which accounted for 34% of total funding this quarter, but down from 42% in Q4’17. This marks the first decline since Q4’16.
  •  North America and Asia are centers for mega-rounds and unicorns. North America saw 35 mega-rounds in Q1’18, while Asia recorded 29, and accounted for four of the five top rounds globally.
  • US and Asia remain tied in unicorn creation, each minting five new unicorns in Q1’18 and up from four the previous quarter. New US-based companies achieving a valuation of $1B or more included UiPath, Intercom, and DoorDash.
  •  First venture rounds decline as a share of all US deals fell to 32% in Q1’18, the lowest percentage since Q1’17. This is correlated to a pullback in VC investment at the seed stage.
  • US-based AI companies had a record quarter as funding leapt 29% in Q1’18. Representing an eight-quarter high in funding, $1.9B was invested across 116 deals to US AI companies. The $1B quarter was led by companies such as UiPath ($153M Series B), Pony.ai ($112M Series A), and Nuro ($92M Series A).
  • Quarterly global deal and funding activity declined, by 4% and 5% respectively, as $46.5B was invested across 2,884 deals.  
  • Deal activity in Asia and Europe saw a slight decline. After heady Q4’17, total quarterly funding to Asia-based companies declined 17% in Q1’18 as $19.1B was invested across 912 deals. This represents a 5% decline in deals, down from 957 the quarter prior. While European deal activity also declined slightly, funding increased 8%, with $4.8B was invested across 593 deals. 
  • New England funding overtook New York Metro, increasing for the third-straight quarter. NY Metro-based companies saw 13% fewer deals than last quarter, recording $2.6B across 172 deals.
  • San Francisco and Los Angeles funding both increased while Silicon Valley funding declined. San Francisco-based companies saw a 23% increase in funding, spurred by 8 mega-deals of $100M or more. LA/Orange County saw funding jump 97% with $1.9B invested across 101 deals. Meanwhile, Silicon Valley (S. Bay) funding declined by 20% to $2.9B in Q1’18, down from $3.6B the quarter before.

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.

About CB Insights

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