Venture Capital (VC) backed companies in the U.S. continued to demonstrate strong demand among investors, reaching a record level of $28.2 billion invested across 1,693 deals during the first quarter of 2018, according to KPMG’s Venture Pulse Q1 2018 report. The U.S. continues to be the global leader in VC funding, representing more than half of the global investment of $49.3 billion in Q1’18.
This is the fourth consecutive quarter that VC investment in the U.S. reached over $20 billion. First quarter 2018 investment eclipsed the earlier all time high of $23.8 billion in Q2’ 16. The record level for Q1’18 was propelled by a number of mega-rounds, including $1 billion plus raises by electric vehicle manufacturer Faraday Future and ride-sharing companies Lyft and Uber.
Eight companies raised financings of $300 million or more within the U.S. during the quarter, which the report notes was due to an overabundance of capital within the venture market. The largest financing of the quarter was the $1.7 billion funding of rideshare giant Lyft, followed by Uber, which conducted a raise and secondary transaction to realize $1.25 billion in Series G1 venture funding.
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“The “as-a-service” consumer segment continues to heat up as people look for more services to help simplify their lives and add convenience to everyday tasks – similar to the rideshare models,” said Conor Moore, national co-leader for KPMG LLP’s Venture Capital practice. “A good example is the food delivery industry, which continues to attract significant investment driven in-part by small restaurants that see food delivery as a means to becoming more profitable and achieving a broader reach.”
VC activity spreading across the U.S.
While most VC investment in the U.S. has historically flowed to Silicon Valley, investments have started to diversify geographically. Over the past year, New York’s VC market grew dramatically, with more than 10 companies attracting $100 million-plus funding rounds.
“In the past, discussions about the VC markets have been primarily focused on the big 4
markets — The Bay Area, New York, Boston and LA. Now we are seeing much more diversity with cities like Seattle, Chicago, Washington DC, San Diego Austin, Philadelphia and Atlanta drawing new investments,” said Brian Hughes, national co-leader for KPMG LLP’s Venture Capital practice.
“These cities have all recognized the importance of startups to their future viability and have therefore focused their attention on creating a fertile ecosystem where companies can nurture and grow. These new markets are also providing a lower cost and higher quality of life alternative,” Hughes added.
U.S. activity remains robust, with earliest-stage activity steadying
Over the past few years there has been a global decline in angel and seed-stage activity, yet the U.S. is slowly beginning to differentiate itself when it comes to this stage. The report notes that although Q1’18 shows a downturn across both stages as well as broader early-stage tallies, the steadiness of volume in the preceding five quarters indicates that the market has corrected from prior excesses.
Exit market within U.S. slowly cycling down
M&A continues to account for the vast majority of liquidity for venture backers. However, exit volume has been slowly trending down for some time, since a peak in 2014. At the same time, aggregate exit value has remained fairly robust. The report says it is clear that opportunities for exits remain available, while there is a crop of large, late-stage businesses deciding to stay private within the U.S., the recent unicorn IPO’s suggest the IPO market may be opening up.
Please visit Venture Pulse Q1 2018 to read the entire report.