US venture capital fundraising and exit activity are running hot in 2019 according to the latest PitchBook-NVCA Venture Monitor.
A steady flow of exits pushed year-to-date exit value over $200bn for the first time ever, surpassing the annual record with a full quarter of the year to go.
Outsized liquidity events continue to be a dominating trend across VC, the report said, with exits over $100m making up 98.7 per cent of value so far this year.
Total venture capital investment has reached $96.7bn through the first three quarters, which puts 2019 on pace to be the second-highest year for venture capital investment behind last year’s record totals.
More than $29.6bn has already been raised by VC firms in the country across the first three quarters of the year, the report shows, already putting it within a whisker of the $30bn-plus benchmark the industry has reached in each of the last five years.
Pitchbook and NVCA said they expected a dip from the enormous $56.8bn raised in full-year 2018, but capital raising activity remains forceful nonetheless, especially at the upper end of the size brackets.
The report said 15 megafunds of $500m or more have already closed this year, while around a dozen more remain open.
Another 150-plus funds are likely to close soon on $50m or more – a stat which has seen micro-funds of less than $50m fall away as the biggest provider of VC funds by number.
The report said, “At the end of 3Q, 2019 fundraising activity appears as robust as ever, with investors continuing to raise capital at elevated levels.
“VC net cash flows have been positive since 2012, meaning capital is returning to LPs faster than they can recycle it into new vehicles, which should fuel the next round of venture funds.
“Despite the continued abundance of capital raised, fund count has taken a dive with 162 closed YTD, and the final is likely to fall short of the 290 raised in 2018.
“The fundraising timeline has also extended, meaning GPs have needed more time to garner enough LP commitments to meet targets.”
PitchBook founder and CEO John Gabbert said, “Many of the trends we’ve seen in the private markets over the past few years persisted through the first three quarters of 2019 as ever-growing sources of capital continue facilitating larger VC rounds and driving investment totals higher across the VC environment.
“Most notably this year, exit activity and the IPO market specifically has been squarely in the spotlight.
“With 67 completed VC-backed IPOs, exit value has already surpassed the annual record in only three quarters of the year.”
NVCA president and CEO Bobby Franklin added, “Venture-backed exits remain the big story of 2019, with record IPO activity sending strong signals to the industry around the opportunities and returns offered by portfolio companies entering the public markets, which is such an important part of the venture life cycle.
“However, challenges for venture-backed companies going public continue, some of which hit the spotlight in 3Q before and after companies listed.
“At the same time, increased CFIUS scrutiny on the startup ecosystem is likely to affect M&A (and investment) sentiment from foreign investors.
“Nevertheless, a robust fundraising and investment environment continues, which coupled with realized returns from large exits, means LPs will be looking to cycle capital back into the ecosystem.”
Copyright © 2019 AltAssets