Exit Market Heats Up in Q2 2019

With $34B of venture capital invested in Q2 2019, the first half of 2019 saw $66B of venture capital invested in approximately 4,900 deals. This is a little behind the record-setting pace of 2018, but it is still on track to be the second consecutive year that VC investment has exceeded $100B. Average deal sizes and valuations in early stage deals are down from the highs achieved in 2018, perhaps signaling some market stabilization. Average deal sizes in the first half of 2019 were $2.1M, $15.0M and $36.5M for angel, early VC, and late-stage VC, respectively.

Exit Market the Headline for Q2

It is hard to believe, but Q2 set a record with $138.3B of exit value, highlighted by 34 venture-backed IPOs. This trend looks to continue with another 14 venture capital-backed companies currently in IPO registration. Uber alone accounted for almost 49% of the Q2 exit value. Total venture-backed exit value for the first six months of 2019 totaled $188.5B, which is more than every full-year total on record.

Mega Deals Not Going Away

Capital availability has certainly allowed companies to continue to raise mega rounds of $100M-plus. In 2018, there were 208 companies that raised venture rounds of at least $100M. For the first half of 2019, 123 companies closed venture rounds of $100M or more. Mega deals accounted for almost 45% of total venture capital investment in the first half of 2019. With the amount of dry powder on the sidelines, the number of mega rounds should continue to grow.

Exits Creating Liquidity for Venture Funds and Limited Partners (LPs); Fundraising Should Increase

The first quarter of 2019 saw fundraising for venture capital funds get off to a slow start. However, the liquidity for LPs created by the record number of exits will allow LPs to reinvest back into venture capital funds. Q2 2019 saw fundraising get back on track, with venture capital funds closing on over $20B in new commitments in the first half of 2019.

Outlook

With fundraising on the rise, mega deals continuing to thrive and liquidity creating strong returns and distributions, I don’t see any slowdown in VC activity in the second half of 2019. Great new technology and life science companies are also seeing available capital from corporate venture capital funds and private equity funds that are also trying to capitalize on high-growth venture capital opportunities. Let’s see what happens with exits in Q3 and how the public markets value these unicorn companies.