Venture Trends in Q3 are kinda boring

Dow Jones just released their Q3 venture capital funding report showing trends in venture investing.  Below are the trends we found most pertinent as well as our commentary. 

 

-Venture dollar investing is steady, but still below 2015 highs.  In the last 12 months (“LTM”), total venture capital invested was $63bln, in-line with the $65bln invested during the 12 month period ended Q3 2016, but below the $76bln invested in the 12 month period ended Q3 2015.  There were 4,178 deals done in the last 12 months which wasn’t a material departure from the number done in prior 12 month periods.  The average venture deal across all stages was $15mm, meaning late stage deals continue to attract the majority of venture capital. 

-B2B Services & IT attracted 55% of capital in Q3 2017.  Healthcare attracted 22% and consumer attracted only 14%.  While it may appear consumer is out of favor, as a venture investor looking for deals in all sectors, we will say we see far fewer consumer focused deals than B2B deals, so we do not believe 14% means consumer is out of favor.  There are simply fewer consumer deals available to do relative to B2B deals.  Software is indeed eating the world.

-Late stage continues to attract the most capital.  Later stage rounds (Series C and beyond) attracted 65% of the capital in Q3 ($10.6bln) whereas Series B and Series A attracted 20% and 13% respectively.  That left only 2% for seed stage rounds ($300mm).  There are more megafunds than ever ($1bln or more to deploy), so the weighting towards later rounds will likely continue. 

-Three cities attracted 70% of investment.  San Francisco based companies attracted 34% of venture dollars invested in the US in Q3 ($6.3bln) while NYC attracted 28% ($5.3bln) and Boston was a distant third at 8% ($1.6bln).  Notably, that means companies outside these three metros attracted only 30% of venture dollars combined.      

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