venture capital

NVCA and PitchBook released Venture Monitor 3Q 2018 this week. The highlight data point in the report is that total U.S. venture capital investment in 2018 is on pace to break $100 billion for the year — and, in fact, to break $110 billion. At the same time, deal volume is on pace to be at the lowest level since 2012, with just 6,583 deals reported to date in 2018. With so much of the macro VC trends driven by mega deals to the latest-stage companies, we dug into the data at the earliest stages of equity investment: accelerators/incubators, angel, and seed financings.

The Angel Capital Association is piloting a new report on the factors that influence successful angel investing and the startups that angels support.  The initial Angel Funders Report covers 2017 data from 26 angel groups and provides new insights for one year of investments. Some of the report’s key findings include:

Inclusive workforce development, downtown revitalization, and an influx of funds for venture capital are among the proposals in an economic development strategy unveiled by New Jersey Gov. Phil Murphy earlier this week. In an effort to focus on bottom-up development rather than a package of tax incentive programs favoring big businesses, the strategy seeks to build the nation’s “most diverse and inclusive innovation economy.”

After considerable growth in the number of startups raising a first round of venture capital financing between 2009 and 2014, there has been a geographically widespread contraction, according to new research from Ian Hathaway at the Center of American Entrepreneurship, a D.C. based advocacy group. In America’s Rising Startup Communities, Hathaway explores the geography of first venture capital financing across U.S. metropolitan areas over the last eight years, finding that just 10 metro areas account for more than two-thirds of all first financings. From 2009 to 2017, the number of startups receiving a first financing increased by 84 percent, and more than one-third of regions saw an increase in deals.

For the first time, the Chinese venture capital (VC) market has surpassed the U.S. VC market in total dollars invested in Q2 of 2018, according to Crunchbase. Driven by mega rounds and strong corporate VC, Chinese startups were able to raise more VC money in Q2’18 than their American counterparts. The strong Q2 for Chinese’s firms was driven by a very strong April. Chinese companies attracted approximately $15.6 billion that month. In comparison, U.S. companies attracted an average of U.S. $9.4 billion per month in Q1’18. In total, Chinese firms attracted approximately 47 percent of all reported VC dollars invested in Q2’18. If this trend continues, 2018 may become the year of the Chinese VC market.

In last week’s Digest, SSTI looked at several macro venture capital (VC) trends, this week’s Useful Stats article focuses on regional trends as well as provides downloadable VC stats by state by quarter from Q1 of 2016 to Q2 of 2018. The data includes median VC deal size, VC deals, and VC dollars invested.

While the five West Coast states (Alaska, California, Hawaii, Oregon, and Washington) continue to dominate the VC landscape with approximately $17 billion invested over 751 deals in Q2 of 2018, the New York City MSA has seen an increase in its share of VC deals (12.8 percent through Q2 of 2018) – up from 11.4 percent for 2017, according to the 2Q 2018 PitchBook-NVCA Venture Monitor. These findings highlight the long-standing trend that the U.S. VC market remains concentrated on the coasts with approximately 71 percent of deals and nearly 88 percent of VC dollars going to the West Coast states, the Mid-Atlantic states, and the New England states. The map below from the 2Q 2018 PitchBook-NVCA Venture Monitor provides a regional breakdown of both deals and dollars.

Investment in 3,912 venture-backed companies reached $57.5 billion invested across 3,997 deals in the first half of 2018, according to the 2Q 2018 PitchBook-NVCA Venture Monitor. With six months remaining in 2018, the $57.5 billion invested by venture capital (VC) firms already exceeds the full-year total for six of the past 10 years. If the current pace of dollars invested continues, 2018 will surpass 2017 as the highest amount of capital deployed by VCs in a year since the dot com era (early 2000s). Q1 and Q2 of 2018 also report as the highest quarters for VC dollars invested since the start of 2011.

While many state startup capital ecosystems have a healthy density of early-stage startups, few states have developed strong late-stage ecosystems, according to a new report from PitchBook – 2Q 2018 PitchBook Analyst Note: VC Ecosystems. PitchBook researchers contend that one potential factor leading to these underdeveloped late-stage ecosystems is the limited number/size of exits coming from those ecosystems. They contend, however, that healthy early-stage startup density could indicate the potential for future growth in many state VC ecosystems, if those ecosystems increase the number of companies with exits. Via this new report, PitchBook outlines a proposed framework for the evaluation of venture ecosystems in the United States. 

A well-known fact about the venture capital industry is the notorious underrepresentation of women partners in the firms.  That could change, suggests research presented in the NBER working paper And the Children Shall Lead: Gender Diversity and Performance in Venture Capital if male VC partners spend more quality time with their daughters.  Deborah Krueze writes in her NBER Digest article that the authors of the research, Paul A. Gompers and Sophie Q. Wang, suggest that the proportion of daughters among a VC senior partner’s offspring is correlated with their firms hiring more women VC partners. Firms whose partners had more daughters also performed better than their competitors, the research finds.

The European Commission and European Investment Fund announced the creation of VentureEU – a fund-of-fund initiative intended to increase the availability of venture capital for the continent’s startup community. Through the VentureEU effort, the EU will invest approximately €410 million (approximately 507.8 million USD) across six funds run by established European fund managers. The EU has two agreements already in place with the additional four anticipated by the end of 2018.