SEATTLE, July 11, 2019 /PRNewswire/ -- The second quarter of 2019 set a quarterly record with $138.3 billion in exit value, bringing total venture-backed exit activity through the first half of the year to $188.5 billion, according to the PitchBook-NVCA Venture Monitor, the authoritative quarterly report on venture capital activity in the entrepreneurial ecosystem jointly produced by PitchBook and the National Venture Capital Association (NVCA), with support from Silicon Valley Bank, Perkins Coie and Shareworks by Morgan Stanley. A flurry of highly anticipated tech IPOs drove exit value to already surpass every other annual exit total. This strong exit activity has produced strong distributions for LPs, who are recycling that capital into new VC funds. Total venture capital investment through the first half of 2019 reached $66 billion and is nearly on pace to match the record levels of capital invested in 2018. At this pace, 2019 would mark the second consecutive year in which VC invested has topped $100 billion, further proving how the strategy has evolved and matured over the last decade. CVC activity tempered slightly this quarter but the percentage of CVC-involved deals over $50 million rose to a new decade high of 21% in the first half of 2019. Mega-deal ($100 million+) activity flourished, with 123 mega-deals closed through the first six months of the year accounting for 44.6% of total VC investment. However, deal sizes and valuations in aggregate have plateaued so far in 2019 after climbing incessantly for several years. Fundraising activity got off to a slower start this year relative to 2018's record but accelerated through 2Q and appears primed to maintain the momentum through year end.
To download the full report and data packs, please click here. PitchBook and NVCA will also be hosting a webinar in partnership with Silicon Valley Bank, Perkins Coie and Shareworks by Morgan Stanley, on July 30, 2019 from 9:00 – 10:00 am PDT. Please click here to register.
"The long awaited tech IPO window that opened in full force in 2Q is an important development for the overall health of the venture ecosystem, with record capital exited and the wave of large VC-backed companies entering the public markets," said Bobby Franklin, President and CEO of NVCA. "We hope to see the robust IPO and investment activity continue, but the industry continues to face obstacles on the public policy front that will affect the future of the ecosystem—primarily the U.S. government's foreign investment scrutiny via CFIUS and the administration's immigration policies remain hurdles for our country's high-growth startups. Nonetheless, it's been encouraging to see a strong first half of VC activity in 2019, and we expect the momentum to continue in the second half of the year."
"The first half of 2019 indicated the record venture activity levels achieved in 2018 are not slowing down thanks to the high levels of available capital. Robust exit activity continues to drive positive net cash flows to LPs and improve aggregate performance for the VC ecosystem," said John Gabbert, founder and CEO of PitchBook. "The unprecedented flood of newly liquid capital has already eclipsed every other annual exit value total, ensuring that 2019 will leave its mark as a pivotal year for the US VC industry."
2Q 2019 represented the largest quarterly exit value ever, with a handful of highly valued unicorns finally transitioning to the public markets. IPOs for Uber, Pinterest, Slack, Zoom and many others helped to drive over $130 billion in exit value in the quarter, headlined by Uber which alone accounted for 48.9% of the total sum exited. With a relative dearth of large acquisitions in 2Q, IPOs' proportion of total exit value moved to new highs, comprising 82.9% of total exit value in 2019. Record IPO value further illustrates the open IPO window, as there have been 48 completed public listings over the first half of the year, a faster pace than 2018. This quarter saw another VC-backed company successfully complete a direct listing with Slack making its public debut a little over a year after Spotify took the unorthodox path to public markets. Slack's first day of trading was remarkably stable and could open up the direct listing strategy to a wider pool of companies as startups consider alternative routes to going public.
Venture capital dealmaking saw $66 billion invested across 4,868 deals in the first half of 2019, which puts the year on track to surpass $100 billion for the second consecutive year. The nature of startups receiving financings is fundamentally changing as investors continue the trend of concentrating capital into fewer yet larger deals. Deal activity at the late stage maintained the strong momentum from the last three quarters, with $20.9 billion invested in 583 deals, marking the first time late-stage investment has surpassed $20 billion in four consecutive quarters. Similar to the trend observed with deal sizes, valuations have flattened out in the late stage. On the CVC side, deal value tempered slightly in 2Q compared to the last two quarters, with corporates participating in 311 deals representing $13.0 billion. However, it's important to note both Q4 2018 and Q1 2019 had a deal over $5 billion that skewed deal values higher, so the dip in value reflects more sustainable levels. The food delivery and enterprise software sectors received elevated VC attention with two of the largest deals of the second quarter. Food delivery mainstay DoorDash secured $600 million in a Series G round and robotic process automation (RPA) software provider UiPath raised a $568 million Series D round.
Venture capital funds closed slightly off pace with 2018's record but is on track to finish around the five-year average, with $20.6 billion raised across 103 funds so far in 2019. The total proportion of VC funds under $50 million is on pace to slide for another year, with the first half of 2019 posting only 34.3% of closed funds in the smallest bucket. Conversely, mega-funds ($500+ million) retained much of the momentum from 2018 with eight closed and more currently in the market. Only two billion-dollar funds closed during 2Q, with Andreessen Horowitz closing a $2.1 billion fund focused specifically on late-stage companies and Lightspeed Venture Partners securing a $1.4 billion fund. First-time fundraising has been slow out of the gate this year, with 10 new GPs securing a fund during the first half of the year, compared to 2017 and 2018, where 40 and 52 first-time funds closed, respectively. Despite strong exits and other tailwinds, there have been signs of fundraising cooling slightly as evidenced by the average fund size sliding to $202.4 million and the median fund coming in at $81.0 million.
The full report will include the following components:
- Angel, seed & first financings
- Early-stage VC
- Late-stage VC
- SVB: Q&A: Sulu Mamdani, Managing Director and Partner
- SVB: The growing impact of family offices
- Deals by region
- Deals by sector
- Shareworks: Are direct public offerings the latest Silicon Valley disruption?
- Spotlight: Healthtech
- Female founders
- Corporate VC
To download the full report, click here.
PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York and London and serves more than 30,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.
About National Venture Capital Association
The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the U.S. venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade association, NVCA arms the venture community for success, serving as the leading resource for venture capital data, practical education, peer-led initiatives, and networking. For more information about NVCA, please visit www.nvca.org.
Sulu Mamdani, Managing Director and Partner at SVB Capital
"If you look at the aggregate unicorn value in the United States at the start of 2018, only 10 percent of that was unlocked via exits last year. 2019, though, is shaping up to be a banner year for liquidity. We've already seen an additional 22 percent of that unicorn value unlocked in the first six months, and the robust pipeline of high-profile IPO candidates could take us to nearly 50 percent by the end of the year. This IPO wave has the potential to make a major impact on the broader venture ecosystem. The result could be a new generation of founders, angel investors and venture capitalists, as key engineers and early employees look to start something new."
Patricia Nakache, General Partner at Trinity Ventures
"The wave of successful tech IPOs this past quarter was great for the industry. More companies are getting in line now that they see the IPO window wide-open, and the strong public market appetite will encourage more VC-backed companies to make preparation for going public. Going public is looking like an attractive option now, especially for unicorns. And all of the IPOs will help drive LP liquidity, which should allow LPs to reinvest in VC. It will be exciting to watch the IPO market in the second half of the year."