Investment Banking

VC Investment on Pace to Match Dot-Com Era

U.S. companies raised $57 billion in venture capital in the first half of 2018, closing in on the 2017 full-year total of $86 billion.
Matthew HellerJuly 10, 2018

Investment in U.S. venture-backed companies is on pace this year to top $100 billion in deal value for the first time since the dot-com era, with deal sizes increasing across all stages of the VC cycle.

Financial data firm Pitchbook reported that $57.5 billion of venture capital was invested in 3,912 companies through the first half of 2018, exceeding six of the past 10 full-year totals.

In 2017, VC investment totaled $84 billion for the full year, the highest amount of capital deployed to the entrepreneurial ecosystem since the dot-com era of the early 2000s.

“The first half of 2018 shows that the investment environment for venture-backed companies is just as robust as it was in 2017, and 2018 may end up even stronger than that banner year,” said Bobby Franklin, chief executive of the National Venture Capital Association, which collaborated in the report.

Record financing for unicorns drove last year’s investments. The group raised $19.2 billion in capital, accounting for 22.8% of total dollars, yet making up just 0.9% of deal volume.

So far this year, $11.8 billion, or 20.5% of the total, has been invested in VC-backed unicorns. But according to Pitchbook, deal values increased across all stages, most notably in the angel and seed stage, which has been boosted by the emergence of pre-seed financings.

Median deal size reached an all-time high for the angel and seed stage — $1.4 million in the first six months of 2018. That was up from $1 million in 2017. In the second quarter, the median age of a company in that stage rose to 3.11 years, up from 2.4 years in 2017, allowing for more time to develop successful business models and increase valuation.

“Different from previous years, it’s not just unicorns or top-end companies raising large rounds — its companies at every stage,” said John Gabbert, founder and CEO of PitchBook. “Once startups are able to produce solid business metrics and establish a business model capable of scaling quickly, they see high demand from venture investors looking to put their capital to work.”

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