VC Off to a Great Start in 2019
May 28, 2019
It looks like 2019 picked up where 2018 left off in the venture capital world. EisnerAmper Director of Capital Markets Alan Wink looks at deal sizes, who’s on his IPO radar and if the good times will last.
DP: Good, thanks. So you had mentioned that 2019 got off to a great start. How so? AW: First quarter, 2019 a little under $33 billion of venture capital was invested. Ironically, it was the second highest quarter in the last decade. If you're an optimist, that's great news. If you're a pessimist, the highest quarter in the last decade was Q4 in 2018. So Q1 was actually a down quarter. But still, it was an unbelievable quarter and it really continues the momentum of 2018.
DP:Now talk to me about the sizes of the deals that you're seeing.
AW:I think the trend is continuing that the rounds are of larger and larger sizes. The trend of large rounds is continuing actually in the first quarter. I think there were 46 deals of $100 million-plus. You're seeing it being skewed to larger deals. You're still seeing seed deals and early stage deals falling in numbers.
DP: I know I've heard some IPO rumblings lately. Who do you have on your radar?
AW: It's going to be an unbelievable year for IPOs in 2019. Mark my words on that. I think 20 companies in registration as of the writing of this blog. I think next up, and it's probably going to be this week, is Uber. I think everyone's waiting with baited breath. I think because of the performance of Lyft in the public markets, the underwriters have reduced the price of Uber. I think originally we thought it was going to be $100-billion offering, hundred-billion-dollar valuation. I think the numbers now are coming down into the $80 to $90 billion range, but still a very significant IPO and there's going to be many, many more following that.
DP: Now we're sitting here this morning, the day after the Dow fell 400 plus, it came back to be under 60. We're seeing some signs of mixed messages on the 2019 economy. Do you foresee a VC slowdown this year?
AW: I do not. I think a lot of the issues around the Dow concerned the tariffs on China, probably not totally impacting the technology space from a venture capital standpoint. I think there's just such a large overhang of capital available. These VC funds raised such large pools of capital over the last three or four years. The capital has to be deployed. And the other interesting thing is as a result of the IPO activity this year, you're going to see a lot of capital return to limited partners. And presumably they're going to turn around and invest that back in funds. That's going to go back into other companies in the future. So I think you're not going to see a slowdown in capital formation this year or the next couple of years.
DP: Now I know it's still a little early but looking at your crystal ball, do you think 2019 will break last year’s record setting year for VC investment.
AW: It's going to be close. If I was a betting man, I would say yes. I think all the signs are leaning that direction.
DP: Now you were telling me earlier about a conference you just came back from that ties into this and really gives you a good idea, based on the people there and boots on the ground of what's going on. Tell us about it.
AW: I actually was a speaker at Emerge Americas – a large tech conference in South Florida that attracts about 15,000 people. And I actually led a session on Sunday on the ABCs of capital formation, building managing teams, and boards of directors for tech companies.
DP:So a good turnout, a good vibe, a lot of energy?
AW: Incredible vibe showing what's going on in South Florida as well as South America. You're seeing a lot of tech development in Brazil, Argentina, Uruguay, and I think the South Florida tech community is really growing and blossoming.
DP: Well, thank you for your expertise and insight as always.
AW:Thanks Dave. Great talking to you.
DP: 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.