RESEARCH TRIANGLE PARK – During the third quarter of 2018, venture capital-backed companies based in the United States convinced investors to increase funding by 17 percent, bringing up the total dollar amount invested to $28 billion, according to the MoneyTree Report from PricewaterhouseCoopers LLP (PwC) and CB Insights.
The surges was due to unprecedented mega-round activity, where deals raise $100 million or more, finds the report, with 16 new unicorn companies in the United States and 13 additional unicorn companies in Asia as a result of third quarter fundraising. Specifically, private US-based companies raised six rounds in excess of $500 million and 55 venture capital rounds in excess of $100 million, the most of any quarter on record in the 23 years of data compiled by the report.
In total, $27.5 billion in capital was invested in venture-backed startups in the third quarter of 2018, said Tom Ciccolella, PwC’s US Venture Capital Leader.
Though the data shows that deal volume decreased in the third quarter and is at its lowest point since the fourth quarter of 2012, Ciccolella still believes that the overall deal volume from the third quarter reflects a healthy startup ecosystem nationally. While the 1,229 deals confirms that deals are still being inked, “early-stage startups wonder if there are adequate funds available,” said Ciccolella.
Tracking unicorn growth
With the addition of 16 new U.S. unicorns and 13 globally, and the continued increase in megadeals, “money rushed into mid- and later-stage companies,” said Anand Sanwal, CEO and co-founder of CB Insights. “The casualty of this rush has been the seed stage, which saw a global decline. The migration out of seed won’t be felt now, but it will have impacts on the venture ecosystem in the coming years.”
NC companies raise more than $200 million
Seventeen companies headquartered in North Carolina raised a combined total of $200,550,000 in the third quarter, led by the $65 million expansion funding raised by AgBiome in Research Triangle Park and Pendo’s latest fundraising round of $50 million to expand their Raleigh headquarters and add additional staff.
Two Charlotte-based mobile and telecommunications companies, Airwavz Solutions and SmartSky Networks, also raised funds in the third quarter. Airwavz brought in $19,450,000 and SmartSky raised $17,410,000 to fund the beta-launch of its new 4G Air-To-Ground network, with plans to raise $110 million more.
The National Venture Capital Association and Pitchbook reported very different numbers for the state in their report earlier this week.
Funding to North Carolina-based VC-backed companies came in at $287.89 million, a 38 percent drop from 2Q and 39 percent drop from 1Q. Even with the drop, the total VC investments in North Carolina VC-backed companies have already reached $1.15 billion—$223 million more than was raised in all of 2017.
In total, North Carolina companies have raised just north of $838 million year-to-date, across 52 total deals ranging from a few million to the $260 million Bril BioSciences deal to accelerate the development and commercialization process for infectious disease medications.
Insights from across the U.S.
According to the data, deal activity in the United Stated declined in the third quarter (1,229) compared to the second quarter of this year (1,501) and the third quarter of last year (1,480), even as the overall total value of the deals ($27.5 billion) increased by 17 percent compared to the previous quarter ($23.6 billion) and 25 percent compared to the third quarter of last year ($20.6 billion).
Breaking down deals by stage
Internet companies raised more than $10 billion in the third quarter, the most of any quarter since the third quarter of 2015, and healthcare companies raised more than $5 billion. Both industries continue to attract venture capital funding and mega-deals worth $100 million or more. Telecommunications companies raised more than $4 billion in the third quarter, the most capital into the industry since the second quarter of 2016.
The average U.S. deal was worth $22.4 million across all industries, though the increase in megadeals raises the average significantly. The industry that averaged the highest deal value was the automotive industry, which attracted $1.9 billion in capital.
“This is the largest quarter we’ve seen,” said Ray Teland, principal, US automotive leader at PwC, by four times the total deal amount of any other quarter on record. There were three mega-rounds among the automotive deals, led by the Public Investment Fund of Saudi Arabia’s $1 billion investment in Lucid Motors.
Real estate technology companies collectively raised more than $1 billion for the first time in the third quarter, said R. Byron Carlock Jr., partner, national Real Estate leader at PwC, “the highest quarter on record.” The deals include $400 million raised by Opendoor which operates in the Triangle and in Charlotte, as home prices and competition in the market continue to increase.
WeWork, Uber, and Peloton all raised $500 million or greater rounds in the third quarter, and Indigo Agriculture raised $250 million in the third quarter, accounting for nearly half of all agricultural technology funding in the industry’s best quarter to date. With their deals, Lime, LegalZoom, and GitLab joined the ranks of U.S. companies recognized as unicorns, with valuations in excess of $1 billion.
