Strong start to 2018 for VC market with Q1 tally of US$49.3 billion invested worldwide

• Q1'18 sees second highest quarter of VC investment ever, as median deal sizes grow
• US dominates VC market globally investing $28.2 billion  
• Americas see record breaking $29.4 billion of investment  
• Unicorns raise $14 billion across 32 deals.

TORONTO, April 11, 2018 /CNW/ - 2018 had a rousing start with US$49.3 billion of venture capital investment raised across 2,661 deals in Q1, just shy of the global record for a single quarter, according to Venture Pulse Q1 2018, a quarterly report on global VC trends published by KPMG Enterprise.  A record-breaking $29.4 billion of investment in the Americas – including $28.2 billion in the US alone – combined with high investment in Asia helped fuel the strong VC market.

While venture capital deal volume continued to decline, the median deal size globally continued to grow across all deal stages in Q1 reaching $1.3 million for angel and seed stage rounds, $7.7 million for early stage rounds, and $15 million for later stage rounds.

"Venture capital investors continue to pour money into late-stage companies, in part because of the number of aging unicorns that have remained private," said Brian Hughes, National Co-Lead Partner, KPMG Venture Capital Practice, and a partner for KPMG in the US. "With strong IPO exits by Dropbox and Zscaler this quarter, and an increase in the number of IPO filings, we could see the tide turning over the next few quarters, bringing with it a resurgence in early stage deals activity."

Q1 '18 Key Highlights

• Global VC investment rose from $46 billion in Q4'17 to $49.3 billion in Q1'18, a solid increase buoyed by five $1 billion+ megadeals.  
• The number of global VC deals declined for the fourth straight quarter, falling from 3,286 in Q4'17 to 2,661 in Q1'18. The number of VC deals has dropped by half since reaching a peak of 5,480 deals in Q1'15.
• The Americas set a new record for VC investment in Q1'18, with $29.4 billion raised across 1,782 deals, with Asia  raising $14.6 billion across 317 deals, and Europe with $5.2 billion raised across 548 deals.
• Corporate participation in global VC deals set a new record for the second straight quarter, rising from 18.5 percent in Q4'17 to 21 percent in Q1'18.
• New and old unicorns – companies valued at over $1 billion – attracted a significant amount of funding with $14 billion across 32 deals.
• Two unicorns went public late in Q1'18: cloud-based security provider Zscaler and cloud-storage provider Dropbox, with both companies seeing positive results to date.  With Spotify set for a direct listing in April and UK-based online loan provider Funding Circle planning to go public later this year, the IPO market may be opening up.

Competition in the ride-hailing space reaches fever pitch
The ride-hailing industry attracted massive VC investment this quarter, accounting for four of the quarter's five largest deals, including: $2.5 billion raised by Singapore-based Grab, $1.7 billion raised by US-based Lyft, $1.5 billion raised by Indonesia-based GO-JEK, and $1.25 billion raised by US-based Uber. Electric car manufacturer Faraday Future rounded out the top five, raising $1.5 billion.

US sees record VC investment in Q1'18, propelling the Americas to strong results
The US saw a record-setting level of VC investment in Q1'18, with $28.2 billion invested across 1,693 deals. In addition to the three $1 billion+ megadeals seen in the US, a bevy of $100 million+ deals helped propel VC investment to a new high. In addition to transportation and autotech, biotech was a big winner in the US this quarter, with large raises by Moderna Therapeutics ($500 million), Harmony Biosciences ($295 million), and Viela Bio ($282 million).

Across the Americas, Canada matched its second-best quarter of VC investment, with $800 million raised across 72 deals, including a $219 million raise by alternative fuels producer Enerkem. Brazil also saw a nice quarter of VC activity, with Nubank achieving unicorn status following a $150 million raise.

VC investment in Europe remains high against historical norms
Europe saw $5.2 billion in VC investment in Q1'18. Amid a quarter-over-quarter decline, Q1 was the fourth highest on record in the region. The number of European VC deals continued its sharp decline, falling to 548, less than half of the number of deals seen during the same quarter last year.

Strong activity outside the UK helped keep European VC investment high although Ireland bucked the trend with investment increasing strongly quarter-over-quarter to $162 million. Germany saw its second highest quarter of VC investment, just shy of $1.5 billion raised and led by a $560 million raise by Auto1 Group. France, meanwhile, achieved a new high of $767 million of VC investment, further cementing its growing prominence as an innovation leader in Europe. Spain also saw a strong quarter, boosted primarily by a $160 million raise by Cabify.

Mega-deals continue to shape Asian market  
Asia continued to see large deals in Q1'18, as two $1 billion+ megadeals were struck  outside China with Singapore-based Grab raising $2.5 billion of Series G financing, and GO-JEK in Indonesia closing on $1.5 billion of Series E funds.   While VC investment in China fell significantly quarter-over-quarter, the country saw a healthy number of $100 million+ megadeals and an increase in the number of deals. India's VC market got off to a great start in Q1'18, seeing a strong rebound in investment. Food and grocery delivery was the hottest area of investment this quarter, with unicorn company Zomato raising $200 million and BigBasket raising $300 million.

Strong outlook expected for remainder of 2018
VC activity globally is expected to remain strong heading into Q2'18, with an increasing focus on artificial intelligence (AI) autotech, and healthtech. With exit and IPO activity also expected to increase over the next few quarters, there will likely also be a renewal of activity at the earliest deal stages.

"AI will continue to a big bet for VC investors across regions because of its broad applicability across sectors and industries," said Arik Speier, Head of Technology, KPMG Somekh Chaikin in Israel. "Particularly in the healthcare space, AI has the potential to foster an entirely new model for providing healthcare, although in the short-term it will primarily be used as a mechanism to supplement existing services and extend the reach of healthcare practitioners."

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Jennifer Samuel, KPMG International, [email protected], [phone]