Strong start to 2018 for VC mar­ket with Q1 tally of US$49.3bn in­vested world­wide

2018 had a rous­ing start with US$49.3bn of ven­ture cap­i­tal in­vest­ment raised across 2,661 deals in Q1, just shy of the global record for a sin­gle quar­ter, ac­cord­ing to Ven­ture Pulse Q1 2018, a quar­terly re­port on global VC trends pub­lished by KPMG En­terpr

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While ven­ture cap­i­tal deal vol­ume con­tin­ued to de­cline, the me­dian deal size glob­ally con­tin­ued to grow across all deal stages in Q1 reach­ing US$1.3m for an­gel and seed stage rounds, US$7.7m for early stage rounds, and US$15m for later stage rounds.

In Aus­tralia, Q1 VC in­vest­ment reached US$130.5m across 16 trans­ac­tions, spurred by sig­nif­i­cant deals in­clud­ing Canva’s US$40m Series C fund­ing round, which val­ued the Syd­ney-based startup at US$1bn. Other sig­nif­i­cant fund­ing deals recorded dur­ing the quar­ter in­cluded data room soft­ware startup An­sarada’s US$18.92m Series A round and Ade­laide-based space IoT startup Myri­ota’s US$15m Series A round.

“Aus­tralian star­tups con­tinue to at­tract in­creas­ing lev­els of com­mit­ment, both from lo­cal and in­ter­na­tional in­vestors,” said Amanda Price, head of KPMG High Growth Ven­tures in Aus­tralia, “with larger in­vest­ment rounds re­flect­ing the am­bi­tions and ca­pa­bil­i­ties of these star­tups to ex­pand into global busi­nesses. Re­cent fundrais­ing by Aus­tralian ven­ture cap­i­tal funds mean­ing there is more money on the table than ever be­fore for our startup founders.”

Q1 ’18 KEY GLOBAL HIGH­LIGHTS

• Global VC in­vest­ment rose from $46bn in Q4’17 to US$49.3bn in Q1’18, a solid in­crease buoyed by five US$1bn+ megadeals. • The num­ber of global VC deals de­clined for the fourth straight quar­ter, fall­ing from 3,286 in Q4’17 to 2,661 in Q1’18. The num­ber of VC deals has dropped by half since reach­ing a peak of 5,480 deals in Q1’15. • The Amer­i­cas set a new record for VC in­vest­ment in Q1’18, with US$29.4bn raised across 1,782 deals, with Asia rais­ing US$14.6bn across 317 deals, and Europe with US$5.2bn raised across 548 deals. • Cor­po­rate par­tic­i­pa­tion in global VC deals set a new record for the sec­ond straight quar­ter, ris­ing from 18.5 per­cent in Q4’17 to 21 per­cent in Q1’18. • New and old uni­corns – com­pa­nies val­ued at over US$1bn – at­tracted a sig­nif­i­cant amount of fund­ing with US$14bn across 32 deals. • Two uni­corns went pub­lic late in Q1’18: cloud-based se­cu­rity provider Zs­caler and cloud­stor­age provider Drop­box, with both com­pa­nies see­ing pos­i­tive re­sults to date. With Spo­tify set for a di­rect list­ing in April and UK-based on­line loan provider Fund­ing Cir­cle plan­ning to go pub­lic later this year, the IPO mar­ket may be open­ing up.

COM­PE­TI­TION IN THE RIDE-HAIL­ING SPACE REACHES FEVER PITCH

The ride-hail­ing in­dus­try at­tracted mas­sive VC in­vest­ment this quar­ter, ac­count­ing for four of the quar­ter’s five largest deals, in­clud­ing: US$2.5bn raised by Sin­ga­pore-based Grab, US$1.7bn raised by US-based Lyft, US$1.5bn raised by In­done­sia-based GO-JEK, and US$1.25bn raised by US-based Uber. Elec­tric car man­u­fac­turer Fara­day Fu­ture rounded out the top five, rais­ing US$1.5bn.

US SEES RECORD VC IN­VEST­MENT IN Q1’18, PRO­PELLING THE AMER­I­CAS TO STRONG RE­SULTS

The US saw a record-set­ting level of VC in­vest­ment in Q1’18, with US$28.2bn in­vested across 1,693 deals. In ad­di­tion to the three US$1bn+ megadeals seen in the US, a bevy of US$100m+ deals helped pro­pel VC in­vest­ment to a new high. In ad­di­tion to trans­porta­tion and au­totech, biotech was a big win­ner in the US this quar­ter, with large raises by Moderna Ther­a­peu­tics (US$500m), Har­mony Bio­sciences (US$295m), and Viela Bio (US$282m).

Across the Amer­i­cas, Canada matched its sec­ond-best quar­ter of VC in­vest­ment, with US$800m raised across 72 deals, in­clud­ing a US$219m raise by al­ter­na­tive fu­els pro­ducer En­erkem. Brazil also saw a nice quar­ter of VC ac­tiv­ity, with Nubank achiev­ing uni­corn sta­tus fol­low­ing a US$150m raise.

VC IN­VEST­MENT IN EUROPE RE­MAINS HIGH AGAINST HIS­TOR­I­CAL NORMS

Europe saw US$5.2bn in VC in­vest­ment in Q1’18. Amid a quar­terover-quar­ter de­cline, Q1 was the fourth high­est on record in the re­gion. The num­ber of Euro­pean VC

deals con­tin­ued its sharp de­cline, fall­ing to 548, less than half of the num­ber of deals seen dur­ing the same quar­ter last year.

Strong ac­tiv­ity out­side the UK helped keep Euro­pean VC in­vest­ment high although Ire­land bucked the trend with in­vest­ment in­creas­ing strongly quar­ter-overquar­ter to US$162m. Ger­many saw its sec­ond high­est quar­ter of VC in­vest­ment, just shy of US$1.5bn raised and led by a US$560m raise by Auto1 Group. France, mean­while, achieved a new high of US$767m of VC in­vest­ment, fur­ther ce­ment­ing its grow­ing promi­nence as an in­no­va­tion leader in Europe. Spain also saw a strong quar­ter, boosted pri­mar­ily by a US$160m raise by Cab­ify.

MEGA-DEALS CON­TINUE TO SHAPE ASIAN MAR­KET

Asia con­tin­ued to see large deals in Q1’18, as two US$1bn+ megadeals were struck out­side China with Sin­ga­pore-based Grab rais­ing US$2.5bn of Series G fi­nanc­ing, and GO-JEK in In­done­sia clos­ing on US$1.5bn of Series E funds. While VC in­vest­ment in China fell sig­nif­i­cantly quar­ter-overquar­ter, the coun­try saw a healthy num­ber of US$100m+ megadeals and an in­crease in the num­ber of deals. In­dia’s VC mar­ket got off to a great start in Q1’18, see­ing a strong re­bound in in­vest­ment. Food and gro­cery de­liv­ery was the hottest area of in­vest­ment this quar­ter, with uni­corn com­pany Zo­mato rais­ing US$200m and BigBas­ket rais­ing US$300m.

STRONG OUT­LOOK EX­PECTED FOR RE­MAIN­DER OF 2018

VC ac­tiv­ity glob­ally is ex­pected to re­main strong, with an in­creas­ing fo­cus on ar­ti­fi­cial in­tel­li­gence (AI) au­totech, and healthtech. With exit and IPO ac­tiv­ity also ex­pected to in­crease over the next few quar­ters, there will likely also be a re­newal of ac­tiv­ity at the ear­li­est deal stages.

“Ven­ture cap­i­tal in­vestors con­tinue to pour money into lat­estage com­pa­nies, in part be­cause of the num­ber of ag­ing uni­corns that have re­mained pri­vate,” said Brian Hughes, Na­tional Co-Lead Part­ner, KPMG Ven­ture Cap­i­tal Prac­tice, and a part­ner for KPMG in the US. “With strong IPO ex­its by Drop­box and Zs­caler this quar­ter, and an in­crease in the num­ber of IPO fil­ings, we could see the tide turn­ing over the next few quar­ters, bring­ing with it a resur­gence in early stage deals ac­tiv­ity.”

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