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Quarterly Investment in US VC-Backed Companies Hits $19B, Report

October 12, 2017, 08:00 AM
Filed Under: Economic Reports
Related: PwC, Venture Capital

Quarterly dollar funding to VC-backed companies based in the United States edged past Q2 2017’s tally for an eight-quarter high, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and CB Insights.

In Q3 2017, investors deployed $19 billion to US VC-backed companies across 1,207 deals, nearly the same as last quarter. Funding activity was driven by another strong quarter of mega-rounds of $100 million or more, as Q3 2017’s total reached 26. The deal total was one short of the tally in Q2 2017 and just above the eight-quarter low seen in Q4 2016.

"With 40% of value coming from mega-deals, Q3 2017 saw the largest quarter for deal value in two years,” said Tom Ciccolella, PwC’s US Venture Capital Leader. “Three of the quarter’s five largest occurred outside of California, further demonstrating the overall health of the venture capital ecosystem across the U.S."

Regional activity was up or flat across most major hubs from Q2 2017. New York Metro saw a massive spike in funding driven by a few mega-rounds. However, funding was down in Silicon Valley (S. Bay Area) falling by 46% this quarter from $4.1 billion in Q2 2017 to $2.2 billion.

Globally, total funding broke $40 billion for the second quarter in a row. Deal activity increased 3% in Q3 2017, as investors distributed $42 billion across 2,645 deals to VC-backed companies. This represents a 4% decrease in total funding from the preceding quarter, however it is still 47% greater than Q1 2017’s total. Deal activity in Asia increased by 25%, despite a 15% decrease in funding. While European deal activity decreased 6%, total funding grew 18% this quarter to $5.2 billion.

“As with last quarter, we saw a healthy number of mega-financings in Q3, which drove strong quarterly funding totals," stated Anand Sanwal, co-founder and CEO of CB Insights. "But mega-rounds now account for a rising share of total funding, while overall deal activity remains in a lower range than 2015 and early 2016. In addition, Q3's downtick in corporate participation is another trend to watch, as a sustained pullback in corporate activity would be a negative for the venture ecosystem, given how big of a role corporations now play.”

Key Q3 2017 highlights:

  • Adding to the strong US quarterly funding total were 26 mega-rounds of $100 million or more, below Q2 2017 totals, but well above the depressed activity seen throughout 2016. Each of the top 3 rounds to US companies were funded by the same investor.
  • Unicorns births declined in North America in Q3 2017. Five new VC-backed companies in the US reached valuations of $1 billion or more in Q3 2017, down from 10 in Q2 2017. Six new unicorns were created in Asia this quarter.
  • Corporate participation fell in Q3 2017, with corporate and corporate VC participation in US deal activity pulled back for the first time in two quarters, dipping below 25% of all deals to VC-backed companies to 23%.
  • US Artificial Intelligence funding topped $1 billion for third quarter in a row. Both deals and dollars to US AI companies continued to be strong in Q3 2017, as $1 billion was invested across 91 deals.
  • Regionally, New York Metro funding soars in Q2 2017. Quarterly funding grew for the second-straight quarter, growing 57% and driven largely by two massive rounds to a shared workspace startup.
  • The New York Metro funding total narrowly eclipsed that of San Francisco (North Bay Area).
  • Silicon Valley funding dipped while San Francisco posted figures nearly identical to Q2 2017. Funding in Silicon Valley (S. Bay Area) decreased by 46%, while deals increased 11%. The same financing totals were recorded in San Francisco in Q3 2017 as were in Q2 2017; while eight mega-rounds of $100 million or more contributed to $1.4 billion of the quarter’s funding.
  • Global dollars broke $40 billion for the second quarter in a row. Deal activity increased 3% in Q3 2017, as $42 billion was invested across 2,645 deals to VC-backed companies. This represents a 4% decrease in total funding but remains 47% greater than Q1 2017.
  •  Asia deals and Europe funding were both up. Deals in Asia were up 25% in Q3 2017. Quarterly funding in Europe increased to $5.2 billion in Q3 2017, growing 18%.
  •  Mega-rounds increased in Asia, as 34 mega-rounds were completed in Q3’17, up from 28 the quarter before and reaching an eight-quarter high. Meanwhile, 28 rounds of $100 million or more were completed in North America, down from 34 in Q2’17.


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