Global venture capital investment drops in Q1 2019, with Europe and the US remaining relatively strong: KPMG Enterprise Venture Pulse report

VC deal volume in Q1 '19 continues to fall across all regions

TORONTO, April 11, 2019 /PRNewswire/ - Overall venture capital (VC) investment dropped from record heights of US$71 billion* in Q4'18 to $53 billion in Q1'19, due to a decline in Chinese investment, among other factors. While US and European investment remained relatively robust quarter over quarter, Chinese VC fell from $10.1 billion in Q4'18 to $5.8 billion in Q1'19, as megadeals took a pause, according to the Q1'19 edition of KPMG Enterprise's Venture Pulse report.

Globally, VC deal volume declined for the fourth consecutive quarter with only 2,657 deals – representing the lowest number in 31 quarters – since Q2'11.   The continued decline in deal volume was felt in every region, but was particularly pronounced in Europe – which saw deal volume drop from 882 deals in Q4'18 to 487 deals in Q1'19.

"We saw a number of distinct trends in the VC market during the first quarter of 2019," said Arik Speier, Head of Technology, KPMG Somekh Chaikin in Israel. "On one hand, deal value remained robust in the US and Europe – powered in large part by big investments in later stage deals.  Europe for example had 10 deals at or over $125 million this quarter, compared to only 6 during Q4'18. However, the big question is if we are facing a turning point in the volume of investment, yet to be seen."

Key Q1 '19 Highlights

• Global VC investment dropped from $71 billion in Q4'18 to $53 billion in Q1'19. The largest deals for the quarter included a $5 billion investment in New York-based The We Company and a $4.5 billion investment in Singapore's Grab Taxi.   
• In Q1'19, the United States saw continued strength in deal value, reaching $32.6 billion – the second highest quarterly total in the past 7 years.  Venture investment in the Americas also remained strong. 
• VC investment in Asia fell dramatically this quarter, from $16.9 billion in Q4'18 to only $13 billion in Q1'19 - representing the lowest quarterly total since Q1'17.  Deal volume also continued a downward spiral that began in Q3'18.
• European VC investment remained strong, powered by 10 deals at or over $125 million in value. However, deal volume plummeted from 882 deals in Q4'18 to only 487 in Q1'19.

Americas see strong start to 2019, following record-shattering 2018
VC investment in the Americas dropped from a record high of $46.2 billion in Q4'18 to $33.3 billion in Q4'18. The US accounted for a large majority of this funding, with $32.6 billion raised in Q1. The $5 billion raise by shared workspace company WeWork was by far the largest VC deal in the US this quarter, dwarfing the next biggest round.  Other big deals this quarter included Nuro ($940 million), Rivian ($700 million), Aurora ($530 million), Clover Health ($500 million) and SpaceX ($500 million).     

The Americas also remained strong with a series of mid-sized deals.  In Canada, Turnstone Biologics' $42 million raise showcased the ongoing strength of biotech and life sciences investments in the country, while platform-based offerings also saw some nice-sized deals, including a $40 million raise by asset maintenance and management platform Fiix and a $30 million raise connected car platform company Mojio.  

Europe experiences mixed results as deal volume and deal value diverge
In Europe, VC investment saw mixed results this quarter, perhaps influenced by ongoing geopolitical uncertainty and associated challenges with Brexit.  Despite the heightening level of uncertainty, many countries within Europe saw significant interest from VC investors.  Overall VC capital investment reached $6.5 billion during Q1'19, just shy of the record high established in Q4'18.  However, deal volume plummeted, falling from 882 in Q4'18 to only 487 this quarter – representing the lowest quarterly total since late 2010.  

The 10 largest deals in Europe this quarter were spread among 6 different countries including 3 from Germany (N26: $300 million, BioNTech: $211.5 million and Wefox: $125 million).  There were also two large French deals (Doctolib: $174.8 million and Ynsect: $128.2 million) and 2 big deals in the UK (Ovo Energy: $281.6 million and Iwoca: $195.6 million).  Other countries represented in the top 10 deals included Finland, Switzerland, and Israel.

VC investment declines in Asia as mega-deals decelerate  
Following a record-setting year, economic uncertainty and trade concerns appear to have taken a toll on investment in Asia during the first quarter.  VC investment in Asia fell in Q1'19, dropping from $21.4 billion in Q4'18 to $13 billion in Q1'19.

A shortage of $1 billion+ mega-deals likely contributed to the decline in VC investment in Asia quarter over quarter, but some big bright spots remained.  Grab Taxi in Singapore attracted $4.5 billion, Chehaoduo received $1.5 billion and Beijing-based AI company Horizon Robotics raised $600 million in early-stage funding.  The top 5 deals were rounded out by Beijing-based Danke Apartment which raised $500 million and Shanghai-based Weltmeister Motor which raised $446 million led by Baidu. In addition to Grab Taxi, Southeast Asia also saw several large deals including Lalamove in Thailand, Ola in India and Zilingo in Singapore. 

Asia continued to attract considerable attention from VC investors in key areas including artificial intelligence, automation, and facial recognition during Q1'19, in part driven by the demand for more robust data analytics. 

Another large crop of unicorns born in Q1'19
Q1'19 saw the birth of 24 new unicorn companies globally across a wide range of verticals including 15 companies in the United States, and 4 in China.  However, the unicorn club of Q1'19 reached beyond the US and China, and included Australia-based Airwallex, India-based BigBasket and Delhivery, France-based Doctolib, and Germany's N26.   Fintech companies accounted for 4 of the unicorns birthed in Q1'19 including Airwallex, Marqeta, Chime, and N26. The growing number of fintech unicorns highlights the rapid maturation of the fintech sector, both in the US and globally.

IPO outlook heating up
Stock exchanges in the US, Europe, and Asia performed relatively well during Q1'19 in spite of some turbulence in late 2018 and heightening concerns over geopolitical challenges and potential trade concerns. 

"Since 2014 the number of active US unicorns has more than doubled to over 160 as private capital is readily available allowing companies to stay private longer," said Brian Hughes, National Private Markets Group Leader, KPMG in the US. "After waiting for years, we finally saw some unicorns choosing to go public in late 2018. We anticipate this trend will continue well into 2019 – spurred by recent high profile offerings such as Lyft, and the ongoing strength of the public markets."

*All figures quoted are in USD.

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