萝莉视频

In Q3 2018, the global venture capital market carried on Q2鈥檚 lampshade-on-head levels of litness.

萝莉视频 News reports that, in the third quarter, worldwide deal and dollar volume totals have each (barely) surpassed Q2 levels. This would make Q3 2018 the most active quarter for worldwide startup investment on record. Moreover, we know that 2018 has already passed 2017鈥檚 global VC dollar volume record, and that is with a whole other quarter to go.

This report from 萝莉视频 News goes deep into the weeds of last quarter鈥檚 venture market. Using data and projections from 萝莉视频, we鈥檒l tell the story of both sides of the cap table: the Money In and Money Out.

In the Money In section, we will unpack the numbers behind startup investments in Q3 2018. We鈥檒l do so for the worldwide market as a whole and for each stage of the funding cycle.

In the Money Out section, we鈥檒l review acquisition statistics and highlight other notable liquidity events.

To help you digest this report, each section will contain a bullish and bearish key finding. Without further ado, let鈥檚 dive in.

Money In

• Bullish Key Finding. Sure, record deal and dollar volume is nice and all, but the jump in seed and early-stage venture is particularly promising.
• Bearish Key Finding. The market is in the middle of reorienting itself to a new center of gravity that may exist outside the quiet offices on Sand Hill Road.

An Overview of The Venture Capital Landscape

Disruption in VC looks like Q3 2018. This isn鈥檛 a classical Clayton Christensen 鈥溾�� case of disruption. It鈥檚 a more of a flipping the table during a particularly feisty Monopoly match and scattering the banker鈥檚 cash in the process.

Over the past quarter, we documented a growing trend in the world of venture: companies raising $100 million or more in what we鈥檝e been calling 鈥渟upergiant鈥� VC rounds. Not long ago, a nine or ten-figure venture funding round would be in the tech press for days. Now so many of these deals close that it鈥檚 almost impossible to cover them all individually.

Here鈥檚 a chart showing the monthly count of $100M+ venture rounds since January 2017.

Like supergiant stars, these huge VC rounds shine brightest in the headlines. But also like supergiant stars, these big VC deals exert a kind of gravity over the whole market.

It鈥檚 arguable that the pressure on some startups to raise huge sums of money has led venture investors (particularly entrenched incumbents) to raise bigger funds over time.

What鈥檚 behind the push? A lot of market analysis, including some of 萝莉视频 News鈥檚 own reporting, points to the , a massive $100 billion pool of capital backed by sovereign wealth funds and deep corporate coffers. Bloomberg the Vision Fund as a 鈥�$100 billion blitz on Sand Hill Road.鈥� It鈥檚 a road in Menlo Park, CA with unassuming office buildings housing some of the best-capitalized investors in the VC game. That is until the Vision Fund arrived.

SoftBank has been one of the most prolific startup investors of all time. (CEO and the company were very active venture investors throughout the 1990s and early 2000s as well.) The Vision Fund is just its latest, gutsiest gambit.

The effect is a major shift in which investors get a seat at the table. If the Vision Fund shows any kind of success, which in the form of boosting SoftBank鈥檚 earnings, expect to see more giant funds like it to spring up. And like the Vision Fund, these new investors may not operate or invest like traditional VCs. In the coming quarters, we鈥檒l be keeping an eye on sovereign wealth funds, large investment banks, and on Softbank CEO Masayoshi Son himself.

Global Funding Activity: A View From Cruising Altitude

Here we take a high-level look at venture market conditions in Q3. We鈥檒l start by examining, in turn, the total number of venture deals and how much was invested. Following this 30,000 foot perspective, we鈥檒l break these statistics down by stage

Pace of Dealmaking

The number of deals struck in a given quarter acts as a kind of speedometer for the venture market. Following a significant acceleration between Q1 and Q2, venture deal volume has leveled off somewhat. However, 萝莉视频 projections indicate that global deal volume has once again set a quarterly high. Worldwide, Q3 2018 was the most active quarter for venture investors, worldwide, ever.

As for Q3 deal volume鈥檚 margin of victory over Q2, it was a real squeaker. Up just under 2 percent from the prior quarter, venture deal volume nonetheless held on to the significant gains made between Q1 and Q2.

As you might already be able to tell from looking at the chart, deal volume growth stemmed mostly from seed and early-stage deals, We鈥檒l explain why in a later section.

Projected VC Dollar Volume

Global venture dollar volume, once again, also set a new all-time quarterly record.

As of the end of Q3, 2018鈥檚 venture funding totals have already surpassed 2017鈥檚 by a decent margin. Of course, we still have a full quarter left to go, and there are no signs that the market is slowing down.

But the margin is narrow here, too. With just under 2 percent growth from the prior quarter, more venture dollars were put to work on startups鈥� capitalization tables than any time in history鈥攂ut not by much.

Most Active Lead Investors

In a startup funding round, the 鈥渓ead鈥� investor is typically the firm鈥攗sually represented by one partner鈥攚hich originates, orchestrates, or commits the most capital to the deal. Let鈥檚 take a look at the investors who got out in front of the most deals last quarter.

We derived this list by analyzing 萝莉视频 data covering Q3鈥檚 reported venture capital rounds. For most of the deals, there is at least one investor listed; in many cases, the data designates which investor led the round versus which investors merely participated or followed on to maintain pro rata rights. From the set of rounds we analyzed, we identified 2,339 unique individual and institutional investors which led at least one round last quarter.

Here are the investors which led the most rounds. Keep in mind that this, and other investor ranks in this report, are subject to change as prior deals are added to 萝莉视频 over time.

has seriously accelerated its investing over the past couple quarters. In Q3, it led supergiant venture deals with Chinese companies like used car marketplace Tuhu, direct-to-consumer eyewear company , and travel booking site , among many .

With this overview complete, let鈥檚 go deeper into the data.

Stage-By-Stage Analysis of Q3 2018 VC Funding Trends

In this section, we look at what鈥檚 going on under the hood of each stage in the venture investment cycle. Like usual, we鈥檒l start 鈥渃lose to the metal鈥� by looking at angel and seed-stage funding before moving up the stack.

Angel And Seed-Stage Deals

Very young startups aren鈥檛 flush with investor cash. The deal a founder seals with individual angels, accelerator programs, or professional seed funds is often the smallest funding round their company will raise. Simultaneously, this is among the most challenging stages of investment to source and close on decent terms.

Angel and seed-stage deals accounted for 60 percent of deal volume, but just four percent of total dollar volume. This is in line with prior quarters.

The chart below plots 萝莉视频鈥檚 projections for seed-stage deal and dollar volume, worldwide. Remember, this and other deal and dollar volume data cited in this report is adjusted upward to compensate for reporting delays. We cover this and other methodological matters in a section at the end.

Angel and seed-stage investment is on the upswing worldwide, with both deal and dollar volume growing appreciably from the prior quarter. 萝莉视频 projects that dollar volume is up over 70 percent since the same time last year.

Here鈥檚 how the size of these rounds changed over the recent past. Note that this is based off of reported data from 萝莉视频, not projections like before. These numbers are subject to change over time as previously undisclosed deals get added to 萝莉视频. The Methodology section at the end discusses the difference between reported and projected data in greater depth.

Some of the first investor checks founders cash are getting bigger. Q3 brought one of the largest sequential jumps in average seed-stage deal size in recent memory, and median round size is up as well. This growing median value suggests a broader population-scale shift toward bigger rounds at this stage, rather than a few big outlier rounds pushing averages higher.

Which investors made the most deals last year? In the funding data, we identified 2,015 unique investors who made one or more seed investments in Q3. Here are the most active among them:

And if you鈥檇 like to review some of these deals for yourself, here鈥檚 .

This could be a promising sign for the global venture market. An abundance of seed-stage deals today could bring a bumper crop of late-stage deals several years down the road.

Early-Stage Deals

Early-stage startups tend to raise more money in their rounds. Early-stage venture accounted for 33 percent of deal volume (right in the middle of a historic range) and 36 percent of dollar volume, which is slightly but noticeably higher than past quarters.

Here is 萝莉视频鈥檚 projections for worldwide early-stage venture deal-making in Q3 2018.

Shifts in investment activity (or lack thereof) at this stage can move the whole market. It appears that happened here. A 19 percent bump in early-stage dollar volume appears to have offset declines in late-stage dollar volume. The end result? Modest gains in aggregate dollar volume, but gains nonetheless.

Here is 萝莉视频鈥檚 reported data for early-stage rounds.

Early-stage deals haven鈥檛 gotten dramatically bigger over the past year. They鈥檝e still grown, but the relatively small change in median deal size suggests that Series A and Series B deals, as a whole, have remained roughly the same size. The bump in the average values likely comes from a handful of very large outlier rounds. Compared to the ballooning size of seed and late-stage rounds though, the relative round size stasis at this segment of the funding pipeline is notable.

Out of the 3,023 unique investors we identified in Q3鈥檚 funding data, here are the busiest among them.

And here鈥檚 the set of .

Late-Stage Deals

In Q2, late-stage venture reigned. What about the impact of late-stage activity in 2018鈥檚 third quarter? It all depends on how you look at it.

Late-stage venture deal volume accounted for just 7 percent of total deal volume, but represented 55 percent of all venture dollar volume, globally. That鈥檚 less than Q2, when late-stage rounds accounted for about 63 percent of worldwide venture dollar volume.

Deal volume, however, continued its general up-and-to-the-right trajectory while dollar volume retraced a bit. In part, Q3鈥檚 dollar volume totals didn鈥檛 benefit from the round closed back in Q2. That deal remains the largest venture capital funding round ever.

Q3 had quite the run of late-stage rounds, which, for the most part, have grown larger over time.

With only two billion-dollar late-stage deals (SenseTime and ) in the third quarter, huge outlier rounds didn鈥檛 exert as much upward pressure on average round size. Although the average declined on a quarterly basis, the mean late-stage deal closed in Q3 2018 is still 40 percent larger than the same time one year ago.

Let鈥檚 see which of the 1,115 unique investors made the biggest splash in the later-stage end of the capital pool.

Late-stage venture in Q3 2018 was a pretty big deal. Here鈥檚 for you to explore.

Technology Growth Deals

鈥淭echnology growth鈥� is what 萝莉视频 now refers to as private equity rounds raised by companies which raised a venture capital round in the past. Followers of these reports will recall that we鈥檝e wrestled with the 鈥渢echnology growth鈥� stage in prior quarters.

This PE round was typically the terminal private funding event for a company before raising from public markets. By the end of our Q3 2017 report, it became clear that the basically broke the late-stage funding market and the most entrenched VCs were raising their own growth funds to keep up.

This being said, plenty of previously venture-backed companies went on to raise PE rounds in Q3. Here鈥檚 the projected data from 萝莉视频.

Given how these deals are classified, the count of PE deals raised by venture-backed companies should track pretty closely with late-stage venture deal volume. And it does. After all, especially for Series E deals or later, the profile of companies raising a late-stage venture round is basically the same as those angling for PE funding.

The next chart points to the ascendency of VC over PE in recent quarters. Here鈥檚 the reported mean and median size of PE rounds raised by previously venture-backed companies.

With bigger funds under their belts, late-stage venture investors are able to continue funding companies long past the point they had to either go public or turn to deep-pocketed PE investors. In other words, most of the round size upside has shifted in VC鈥檚 favor.

And with that, we鈥檝e come to the end of our journey looking at startup fundraising around the world. Let鈥檚 see how the money shakes out of these companies.

Money Out

• Bullish Key Finding. Even companies with very short operating track records and messy balance sheets are managing to go public. The IPO window is very much open.
• Bearish Key Finding. The M&A market continues to be wishy-washy, worldwide, which weighs on bloated portfolios in need of exits.

Venture-Backed Acquisitions

When it comes to investing in private companies, putting money into a venture is often the easy part. It鈥檚 getting the money out鈥攁nd hopefully more than at the start鈥攖hat is the stickiest wicket in the whole process.

An 鈥渆xit鈥� by way of merger or acquisition is among the most common ways startup investors are able to liquidate their long-held stock positions.

Here鈥檚 a chart plotting 萝莉视频 data for venture-backed acquisitions.

For the past several quarters, 萝莉视频 News has documented a fairly consistent decline in M&A exits for venture-backed companies since the beginning of the year. This quarter is no different.

But this isn鈥檛 to say there weren鈥檛 any notable M&A deals this quarter. A selection of those can be found in the table below.

Let鈥檚 see what鈥檚 happening over at the public end of the capital pool.

Initial Public Offerings

Initial public offerings (IPOs) are the second primary way investors, founders, and employees get to liquidate their positions.

2018 has been a fairly active year for IPOs so far, worldwide, and its third quarter was no exception. One of the curious features of the Q3 IPO market is the international diversity. As 萝莉视频 News pointed out in a review of the quarter鈥檚 public debuts, many of the most memorable IPOs on U.S. markets have been for companies based in China (笔颈苍诲耻辞诲耻辞鈥檚 IPO and NIO鈥檚 listing come to mind), the United Kingdom (Farfetch and Endava), and Norway (Opera).

Though many of the companies going public have long grown out of the startup phase, many can still torch huge piles of cash in the name of growth. A separate survey of all 2018 IPOs found that over 80 percent of companies that went public (on U.S. markets) in 2018 are unprofitable.

On the one hand, this is something that both Wall Street financiers and Main Street retail investors should remember. Don鈥檛 pin hopes of future riches on a financial dumpster fire.

On the other hand, this should be reassuring to fence-sitting founders and their boards. NIO proved that a track record isn鈥檛 necessary if the market opportunity is large and investors are enthusiastic. The IPO window is wide open, but it seems like we鈥檙e still going to have to wait until 2019 for shares in the biggest of the world鈥檚 unicorns鈥� and among them鈥攖o officially hit public markets.

Conclusion

Beyond the surge in supergiant rounds, there鈥檚 an even clearer manifestation of a market in transition. Two major venture funds will no longer exist as we knew them.

Q3 brought the , a relatively new firm managed by former Facebook exec , with . Also during this time, 鈥攁 45+ year old VC firm which for a time had the most assets under management in the business鈥� into an early-stage fund, and whatever late-stage vehicle now-departed partner spins .

As venture increasingly skewing toward supergiant rounds and mega-funds, don鈥檛 be surprised to see more firm denouements in the coming quarters.

As for the fourth quarter itself, there鈥檚 one thing to remember: in some ways, it doesn鈥檛 really matter for 2018. It鈥檚 bonus time on the clock. We鈥檙e already in uncharted waters this year, and they鈥檙e bound to get choppier as huge new funds splash down.

Methodology

The data contained in this report comes directly from 萝莉视频 in two varieties: projected data and reported data.

萝莉视频 uses projections for global and U.S. trend analysis. Projections are based on historical patterns in late reporting, which are most pronounced at the earliest stages of venture activity. Using projected data helps prevent undercounting or reporting skewed trends that only correct over time. All projected values are noted accordingly.

Certain metrics, like mean and median reported round sizes, were generated using only reported data. Unlike with projected data, 萝莉视频 calculates these kinds of metrics based only on the data it currently has. Just like with projected data, reported data will be properly indicated.

Please note that all funding values are given in U.S. dollars unless otherwise noted. 萝莉视频 converts foreign currencies to US dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs, and other financial events as reported. Even if those events were added to 萝莉视频 long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of Funding Terms

• Seed/Angel include financings that are classified as a seed or angel, including accelerator fundings and equity crowdfunding below $5 million.
• Early stage venture include financings that are classified as a Series A or B, venture rounds without a designated series that are below $15M, and equity crowdfunding above $5 million.
• Late stage venture include financings that are classified as a Series C+ and venture rounds greater than $15M.
• Technology Growth include private equity investments with participation from venture investors.

滨濒濒耻蝉迟谤补迟颈辞苍:听