2018 was a historically good year for venture capital in the United States in terms of dollars invested by VC funds in U.S. companies, dollars raised by VC funds and dollar value of exits by VC-backed companies, according to the Venture Monitor for Q4 2018 published by PitchBook and the National Venture Capital Association. VC funds invested over $130 billion in over 8,000 portfolio companies in the U.S., limited partners committed $56 billion to 256 new American VC funds and 864 venture-backed exits exceeded a combined value of $120 billion. Here’s a slightly deeper dive into some of the numbers:
- Record Year for VC Investments: The $130 billion invested by VC funds in U.S. companies marked the first time annual capital investment surpassed the $100 billion watermark set at the height of the dot-com boom in 2000.
- Historical Year for VC Fund Capital Commitments: The $55.5 billion committed to new fund formations in 2018 was the highest amount of capital that PitchBook has ever recorded and the fifth consecutive year that at least $34 billion was raised by VC funds in the U.S.
- Bigger but Fewer Funds: The median new venture fund raised $82 million, nearly triple what it was in 2014. The number of new funds, however, was below a 2016 peak.
- Beginners’ Luck: Even first-time fund managers kicked butt, raising over $5 billion, the highest figure recorded in over ten years.
- Early Stage Deals Surge: Early stage (Series A or B) value and count reached decade highs. Early stage median deal sizes were also higher in 2018, creating a perception that Series A is the new Series B.
- But Number of Angel & Seed Deals Tanked: Although angel and seed median deal sizes increased (as was the case with the rest of VC), the number of angel and seed deals dropped by roughly half since its 2015 high.
- Valuations Soaring: Median pre-money valuations more than doubled since 2013 for Series A, B, C, and D+ rounds, with the median of the latter seeing a three-fold increase.
- Latest Stage Valuations Remain Fastest Growing. Median pre-money valuation of companies in Series D deals or higher shot up to $325 million, an increase of approximately 30% over 2017.
- Bigger Exits, including IPOs: Total exit value surpassed $120 billion for the first time since 2012. The 85 IPOs were the most since 2014 and represented more than 50% of exit value for the second straight year.
- Usual Suspects Continue Regional Dominance: No shocker, California, Massachusetts and New York continued to dominate VC investment activity, with companies in those states attracting 79% of total U.S. capital invested, although only 53 percent of completed U.S. deals.
With VC funds stockpiling massive amounts of dry powder as a result of five consecutive years of $34+ billion capital commitment hauls, VCs should be well positioned to invest in startups for the next few years, even if there’s a downturn in the VC market.