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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