The final quarter of 2018 saw nearly US$64 billion* in VC investment globally, led by a $12.8 billion funding round to US-based e-cigarette manufacturer Juul. The VC deal, second only to the $14 billion raised by China’s Ant Financial in Q2’18, helped propel annual VC investment globally from $175 billion in 2017 to a massive $255 billion in 2018, according to the Q4’18 edition of the KPMG Enterprise Venture Pulse report.

While every region identified in the report —the US, Americas, Asia and Europe — saw a record high level of annual VC investment during 2018, the total number of VC deals globally declined to a 6 year low of 15,299 deals during the year, compared to 17,314 in 2017 and a peak high of 20,172 in 2015. The drop in quarterly deal volume was even more stark, with the 3,048 deals seen in Q4’18 the lowest number in 25 quarters since Q3’12.

“The record levels of funding we are seeing around the world highlight the intense focus VC investors are placing on late-stage deals. One billion+ mega-deals alone in Q4’18 accounted for $22 billion in investment – approximately a third of the total funding raised this quarter,” said Brian Hughes, National Co-Lead Partner, KPMG Venture Capital Practice, and a partner with KPMG in the US. “While the extended decline in the number of deals, particularly at the earliest deal stages, is somewhat concerning, the highest quality companies are still attracting investment and we expect to see a strong IPO market in 2019.”

 

Key Q4’18 Highlights

 

• Global VC investment rose from $56 billion in Q3’18 to more than $64 billion in Q4’18. The $12.8 billion Juul deal, in tandem with five $1 billion+ megadeals, helped bring the Q4’18 total to the second highest level of funding ever.
• In Q4’18, both the Americas and the US set a second consecutive record for quarterly VC investment. In the Americas, nearly $43 billion was raised in Q4’18, with the US accounting for $41.8 billion of this total.
• The $12.8 billion Juul deal also set the record for the largest VC deal ever in both the Americas and the US. In addition to the deal, the US saw one other $1 billion+ funding round: a $1.25 billion raise by Epic Games.
• VC in Asia dropped significantly this quarter, from $17.6 billion in Q3’18 to a seven-quarter low of $15 billion during Q4’18. Despite the decline the region saw four $1 billion+ deals, including China-based ByteDance ($3 billion), Singapore-based Grab ($2.85 billion), Indonesia-based Tokopedia ($1.1 billion), and India-based Swiggy ($1 billion).
• European VC investment rose slightly, with $5.9 billion raised in Q4’18 compared to just over $5.6 billion in Q3’18. Europe’s largest deal this quarter was a $200 million Series D raised by UK-based Graphcore.

 

 

2018 Annual Highlights

• Every series achieved a new high in median pre-money valuations in 2018, from a staggering $375 million for Series D or later rounds, to $6.7 million at the seed stage.
• The global median Series A financing was $7.5 million in size in 2018, far outstripping any prior year.
• Global median pre-money valuations rose across all deal stages in 2018, including a staggering $375 million for Series D or later rounds, and $6.7 million for seed stage rounds.
• The global median Series A financing rose dramatically in 2018, reaching $7.5 million.
• VC investment in urban mobility skyrocketed from $26 billion in 2017 to close to $45 billion in 2018.
• VC investment in artificial intelligence related to healthcare almost doubled, from $1.25 billion in 2017 to $2.34 billion in 2018.
• Agtech continued to rise on the radar of VC investors, with total global investment growing from $1.93 billion in 2017 to $2.15 billion in 2018.

 

Record level of VC investment in Americas in Q4’18, led by funding in US

 

VC investment in the Americas rose from $32.5 billion in Q3’18 to a quarterly record high of $41.8 billion in Q4’18. The US accounted for a large majority of this funding, with $42.9 billion raised in Q4. The $12.8 billion raise by US-based e-cigarette company Juul was by far the largest VC deal in the US to date, and the second largest VC deal ever next to Ant Financial’s $14 billion raised in Q2’18.

This quarter, Epic Games also raised $1.25 billion. The US also saw several $500 million+ megadeals this quarter, including Instacart ($871 million), Castle Creek Pharma ($560 million), Automation Anywhere ($550 million), and Movile ($525 million).  For early stage companies in the US, first-time fundraising surged to an impressive 57 in count for 2018: the highest total seen this decade.

VC activity in Canada was strong throughout 2018, with the country attracting $2.9 billion in VC funding over the year to achieve a new annual high. While Mexico had a quiet year on the VC front, it ended the year on a more positive note, attracting more than $60 million in funding during Q4’18.  Brazil also saw a very strong Q4’18 to end the year, with close to $350 million raised.

 

 

Europe sets third consecutive annual record for VC investment with a small increase in Q4’18

Europe set a third straight record for annual VC investment, attracting $24.4 billion in VC investment over 2018.  Deals volume in Europe, however, fell considerably over the course of the year – from 4,607 deals in 2017 to 3,380 in 2018.

Investment quarter-over-quarter was also strong in Europe, with a small increase from $5.6 to $5.9 billion between Q3 and Q4’18. While the UK accounted for four of the quarter’s 10 largest deals (Graphcore: $200 million; Nested: $156 million; Moonbug: $145 million; and Monzo: $110 billion), the other largest deals showcased the diversity of Europe’s ecosystem with deals in Germany (HomeToGo: $150 million; EuroGo: $150 million), France (BlaBlaCar: $117 million), Ireland (GC Aesthetics: $97 million), Denmark (Galecto: $92 million), Israel (Team8: $85 million), and Switzerland (Nexthink: $85 million). 

 

 

Asia shatters record for annual VC funding, in part due to Q2 raise by Ant Financial

Asia-based VC investment reached a massive annual high of $93.5 billion during 2018 – up from $65.2 billion in 2017. This increase was driven in no small part by Ant Financial’s $14 billion raise in Q2’18. While VC investment in Asia fell from $17.6 billion in Q3’18 to $15 billion in Q4’18, the results remained relatively strong outside of outlier Q2’18. VC investment this quarter in Asia was dominated by massive deals, including $1 billion+ deals to ByteDance, Grab, Tokopedia and Swiggy.

Quarterly volume declined to close the year, but volume remained more than healthy on a historical basis, roughly in line with the level seen in 2014; large late-stage deals, meanwhile, propelled 2018 VC invested to a record high of $93.5 billion in Asia-Pacific

 

Future less certain heading into 2019

Given the extraordinarily strong year for VC investment in the US, Asia and Europe, including the two largest VC deals in history, the total level of investment in 2019 will be tough to match. However, there will likely continue to be substantial VC investment globally, particularly in late-stage deals.  Autotech – whether autonomous vehicles, alternative energy vehicles, or ride hailing - is expected to see strong investment, in addition to healthtech and fintech. On the technology front, artificial intelligence is also expected to see strong growth.

The IPO market will be one area to watch as several massive unicorns, including Uber and Lyft, prepare for IPOs despite the unexpected turbulence in the capital markets at the end of 2018.

 

“In 2018, we saw the IPO door swing wide open globally with a number of significant IPOs across the world,” said Arik Speier, Head of Technology, KPMG Somekh Chaikin in Israel. “While the last month of 2018 was highly tumultuous for the capital markets, if it settles down quickly in Q1’19, we may see a number of the aging unicorns looking to exit. If those companies do well, others will follow.”

*All figures are in US dollars.

 

 

 

 

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