The Booming VC World in Q2 2019

August 5, 2019

Venture capital (VC) investment is booming.  After a record year in 2018, many analysts thought 2019 would be a letdown.  There would be no way that VC could even come close to the massive 2018 investing.  Well, that view has changed.  A look at the state of VC activity in the U.S. follows.

VC Pulls from Investors

First up is the amount of VC money deployed by quarter over the past five years.  Amazingly, for the sixth consecutive quarter, VCs have invested $25 billion or more.  Although down from the massive fundraising in the fourth quarter of 2018, both quarter in 2019 have been more than healthy.  The most recent quarter came in around $30 billion, down slightly from the prior quarter.

Massive Deals are Becoming “Normal”

The second telling chart of the state of VC acidity is the count and value of “mega-deals”.  Through the first half of 2019, there have been a total of 123 mega-deals amounting to almost $30 billion in value.  That is almost on target to hit 2018’s record year of 208 mega-deals with deal values of almost $62 billion.  There is no sign, yet, that VC activity is entering any sort of doldrums environment.  Investors are still in love with successful entrepreneurship. 

A Cautious Note

The third chart on the state of VC in the U.S. paints a bit more cautious note.  Shown in the following is quarterly U.S. angel and seed deal activity.  Since peaking at 1,511 in the first quarter of 2015, angel and seed activity has slowly decelerated, with the deal count down to 1,001 in the second quarter of 2019.  Deal value has also stayed relatively flat.  In the second quarter of 2019, deal value reached $1.7 billion, which is down slightly from the $2.0 billion in the first quarter of 2015. 

Investors, in a somewhat jittery note, have pushed their angel and seed investing activity to later stages of a company, with the median age of a company receiving its first angel investment at about 3 years.  Apparently managing risk in VC investing means shifting attention to somewhat more established companies.

A Geographic Breakdown

The last chart on the state of VC activity is a geographic breakdown of activity.  As expected, the West Coast, which comprises California, Oregon, Washington, Alaska, and Hawaii, dominates VC investment.  In the second quarter of 2019, the West Coast attracted 58 percent of all VC activity.  The next closest region was the Mid-Atlantic at 17 percent.  None of the remaining regions surpassed 10 percent of total deal value.  VC still loves California, at least for the near term.

Conclusion

Venture capital activity is doing so well, it is almost unbelievable.  After a record 2018, this year has given us no letdown.  If the first half of 2019 is any indication of where venture capital activity will end this year, we are in for another massive year of deal making, public offerings, and rewards for successful entrepreneurship.  May the good times live on forever.

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