- “More is more” was the mantra for startups seeking funding in 2019.
- A new report from PitchBook and the National Venture Capital Association summed up the trends that led to record deal sizes, higher valuations, and the rise of mega-rounds last year.
- These are the 11 most revealing statistics on venture capital that you need to know for the year ahead.
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It’s no secret that there’s a lot of money pouring into the tech startup scene these days. The arrival of SoftBank and its $100 billion Vision Fund has super-charged the funding climate. But even aside from SoftBank, last year contained several important milestones and developments for venture capital funds and startups.
Here are some of the key metrics from 2019. Whether they are surpassed once again in the next 12 months or stand as the high-water mark will be one of the big stories to watch in the VC industry.
There was no stopping the avalanche of capital plowing into startups in 2019.
Investors plugged $136.5 billion into venture-backed companies in the US last year, down slightly from 2018. The number of deals, however, crept higher to 10,777 in 2019 from 10,542 in 2018.
Last year there were 273 “mega-rounds,” that is, a fundraising event where a company pulled in more than $100 million. These super-sized deals are becoming more common — and were up almost 12% from 2018 — as tech investors raise bigger and bigger funds to compete for access to the fastest-growing startups.
Startups are waiting longer to take outside capital. In 2019, the median age of companies raising angel or seed funding was 2.9 years, continuing a steady rise from the 1.5 years median age in 2012.
PitchBook’s report identified two reasons for this: The cost of starting a business has shrunk because of the availability of software services and cloud computing. Also, founders can raise money from other sources, such as crowdfunding or debt financing.
The startups that delay are more mature when they go to fundraise, and are able to command bigger deals and valuations, according to the report.
25% of early-stage deals
Those outsized transactions known as mega-rounds accounted for almost 25% of the capital put into early-stage deals in 2019. Young startups gobbled up cash in the pursuit of growth without revenues, though this approach has come under fire from investors in recent months as more startups suffer layoffs.
Lowest since 2013
The nation’s tech capital lost some of its share of venture deals to other emerging metropolises. In 2019, the San Francisco Bay Area posted its lowest proportion of overall venture investments since 2013.
The amount of money invested in startups on the West Coast slipped to 50% of the nationwide total in 2019 from 62% in 2018, while venture spending went up at least one percentage point in the Mountain, Southern, and Mid-Atlantic regions.
There’s more money available to startups in the healthcare sector. The venture funds focused on this sector raised $10.7 billion last year, setting a new high for the third year in a row.
2,597 late-stage deals
The number of late-stage deals reached a new record in 2019, topping 2,500 for the first time with a total of 2,597 deals.
It’s a marker of investor interest in these types of deals. They are able to make more informed decisions because late-stage companies can raise money based on their battle-tested business models.
90% of unicorns
The startups making their public markets debut in 2019 are much better funded than their predecessors.
In the past, a venture-backed company would raise $100 million in financing on average ahead of going public at a valuation of $100 million, said Greg Becker, chief executive of Silicon Valley Bank, which also sponsored the report. “Today, more than 90% of unicorns have already raised at least $100 million in a single private financing,” he wrote.
Last year logged almost 3,900 deals involving software startups. They pulled in a total of $43.5 billion, up six times from $7.3 billion a decade ago.
Although there’s more money plunging into software startups, the number of those type deals fell from 4,141 in 2018.
It was a record year for female-founded startups seeking funding, with the number and value of deals involving companies started by women trickling higher. Investors put $18.3 billion into female-founded startups across 2,184 deals, up from $16.9 billion and 2,057 deals in 2018, according to the report.
The corporate venture capital fund officially arrived in 2019. These funds, defined as separate entities that invest a company’s money into private companies the same way any other investor would, participated in about 25% of deals over the past four years.
Corporate funds added to the pot in almost 1,700 transactions last year, “highlighting how important corporations now consider startup investment to their overall growth strategy,” according to the report.