Editor’s note: Pitchbook and the National Venture Capital Association (NVCA) released venture capital data from the 4Q 2017 on Tuesday in their quarterly PitchBook-NVCA Venture Monitor report. While a full report complete with trend analysis is forthcoming, the sneak peek provides a trove of data comparing North Carolina and four of its regions to other states and regions nationwide. This is the third in a series of articles from WRAL TechWire focused on parsing apart the data and what they say about trends in the Triangle, the state, and nation. After digging into the data, we’ll hear from investors and entrepreneurs who participated in the 2017 venture capital investments, and finally we’ll compare with data from other reports. After looking at the Triangle and North Carolina, we now broaden our scope and look at national trends.
RESEARCH TRIANGLE PARK – The amount of dollars Venture Capitalists invested in companies rose 16.3 percent between 2016 and 2017 according to new data from Pitchbook and the National Venture Capital Association. Investments totaled $84 billion and were spread across 8,035 companies through 8,076 deals.
In addition to the obvious increase, the report reveals several trends occurring across the nation in the venture capital industry. As NVCA President and CEO, Bobby Franklin says, “2017 will be remembered as a year of changing market dynamics for the industry.”
1) VC-backed companies are staying private longer,
2) growth stage companies are “commanding larger deal sizes,”
3) the number of deals has decreased,
4) exits are down too, but not among unicorns,
5) investments in life science and emerging technologies increased,
and 6) unicorns are dominating.
Many of the trends the data reveal can be explained by the steady increase and focus on backing unicorns—or companies valued at $1 billion or more. This year’s deal count is the lowest it’s been since 2012 when 7,849 deals were made. Meanwhile, the sheer value of the investments is higher than it’s been in at least a decade. When combined, the two trends add up to one thing—fewer companies are increasingly receiving larger shares of the available venture capital. And per the Pitchbook-NVCA data, most of those companies are unicorns.
With $19.2 billion raised across 73 deals, unicorns commanded 22.8 percent of the total investments made. Meanwhile, that $19 billion was spread across just .9 percent of all deals.
The unicorns and other VC-backed companies are holding onto their status as private for longer too. Of the top ten largest deals of the year, only three early stage companies made the list. That’s because late-stage growth companies are waiting longer to exit than in years past. There were 769 exits in 2017, down 10 percent since 2016 and 28 percent since 20143’s high of 1065 exits. Of the 769 exits, 13 were from unicorns like the personal stylist and clothing delivery startup darling, Stitch Fix , and MongoDB —the New York based open-source database company.
The rise in funding in life science and emerging technology companies is part of a multi-year uptick. Investments in Life Science companies accounted for 13.53 percent of all funding invested in 2017.
The number and size of VC funds increased in 2017 too—$32 billion poured into 209 funds across the country including notable funds like the largest VC fund ever raised, the New Enterprise Associates’ $3.3 billion fund and Steve Case’s new $150 million “Rise of the Rest” seed fund.
With soaring investment figures, and a more plentiful venture capital ecosystem than has been seen in years, the current venture capital industry has been compared to the dot-com era on several occasions—inspiring both excitement for potential and fear of bust. But CEO and founder of Pitchbook, John Gabbert says the data reveal some key differences. He says, “there are game-changing core verticals like VR and AR, IoT, AI and Fintech generating massive investments.” And Franklin points to policy developments that will “have lasting impacts on the ecosystem in 2018 and beyond,” as a key difference between 2017 and the dot com era. In a word, Gabbert describes the current venture capital ecosystem as, “healthy.”