Q4 2018 Closes Out Record-Setting Year for VCs

January 14, 2019

By Alan N. Wink

A Quarterly Wink and a Glance at Venture Capital

Last year, 2018, was a tremendous year for venture capital investment in both the U.S. and globally. Over the course of the year, $130.9B of VC was invested in 8,948 deals in the U.S. This was a significant jump from the $83B invested in 2017. In fact, 2018 was the first year since the height of the dot-com boom that VC investment surpassed $100B. Globally, 2018 recorded $293B of VC investment, which was the most money invested in the highest number of private technology companies on record.

Transaction Sizes Continue to Dominate the Deal-Making Environment

Late-stage deals continue to be a large percentage of total capital invested. In 2018, more than 60% of capital invested was for deals of $50M or larger. As a result, we are seeing larger median deal sizes and higher median valuations. Unicorn companies continued to raise large rounds in 2018, to the tune of more than $44B, and accounted for almost 34% of all venture capital deployed.

Very Strong Fundraising in 2018  

Fundraising general partners experienced a record year in 2018. In fact, it was the all-time high for dollars raised in a single year. A total of $55.5B of VC was raised for 256 funds. In 2018, fundraising was not just limited to the mega-funds. First-time funds achieved record results, with 52 new funds raising more than $5B.

Best Exit Market Since 2012

A total of 864 VC-backed companies had exits of $120B in 2018, which was the highest level since 2012. This represented a 33% increase in exit value from 2017. IPO activity was brisk in 2018 and represented more than 50% of the total exit value. IPOs completed in 2018 amounted to 85 and this represented the highest number since 2014.

Outlook

With record capital deployment and fundraising, and no slowdown in the innovation ecosystem, I’m certainly bullish on VC investment in the near future. Funds are sitting on enormous amounts of dry powder waiting to be invested in some of the best performers in the tech ecosystem. There was some volatility in the public markets near year-end, and many will be watching that volatility as it relates to the 2019 IPO market. Fasten your seatbelts; 2019 will be an interesting year for venture capital.

About Alan Wink

Mr. Wink assists clients with capital budgeting, capital structuring and capital sourcing. He has worked with many tech and life science companies on developing the appropriate capital structure for their position in the business life cycle.

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