Venture Capital Breaks a Record in 2018

DP: In our last podcast, if you remember Alan, you took the “over” on the “over/under” for VC investment topping $100 billion for 2018. I think that turned out to be a bit of an understatement.
Alan Wink: I didn't think it was going to be that high; just an incredible year all around, both for investing and for fundraising. But not only did it top $100 billion, it was almost $131 billion for the year. That’s probably the highest watermark since the dot-com era in the early 2000s and it really crushed 2017. So $131 billion invested in 2018, $83 billion invested in 2017. Just an incredible year.
DP:I guess it's safe to say that quarter four came in strong.

Alan Wink: Very, very strong.

DP: What was the composition of the deals as far as size, timing, sectors and so forth?Alan Wink: I think we're continuing to see the advent of the large deal. About 60% of the capital invested was actually in deals of $50 million dollars or more. Unicorn companies continue to raise enormous rounds of capital. Unicorns accounted for about $44 billion of the $131 billion invested last year, about 34% percent of total venture capital deployed. I think we're continuing to see VC-backed companies raise larger and larger pools of capital and later and later in their life cycles.DP:Exits had a high watermark of their own, didn't they?

Alan Wink: Absolutely. About $120 billion of VC-backed exits last year. The highest level since 2012. It actually represented about a 33% increase in exit value over 2017. A big part of that was IPO activity was very brisk last year. About 50% of the exit value was attributable to IPOs. About 85 IPOs completed last year. Highest number since 2014

DP: Now can we possibly maintain this pace, particularly given some negative economic indicators starting to creep in a little bit?

Alan Wink: I think we saw a little downturn in the public markets in Q4 last year, primarily toward the end of the calendar year. There are a number of unicorn companies that have publicly stated that they're going to be going through the IPO process in 2019. The SEC was impacted by the government shutdown, so that might slow activity a little bit. But I think there are a lot of great tech companies that are thinking about IPOs this year; the IPO market is going to be very robust. As I said in my opening remarks, last year was a banner year for fundraising – $55 billion dollars was invested. As a result, there are a lot of VCs that are sitting on dry powder that's got to be invested. I expect 2019 to continue the trend of 2018, and I'm not sure how high it can go.
DP:Alan, thanks for your expertise and insight. I look forward to regrouping in a few months and seeing how we did in the first quarter of 2019. And thank you for listening to the EisnerAmper podcast series. Visit EisnerAmper.com for more information on this and a host of other topics. And join us for our next EisnerAmper podcast when we get down to business.