BY Fraser Tennant
Building off the “optimism and momentum” that has returned to the US and global markets in recent months, venture capital (VC) investment in the US rose to almost $24bn in Q4 2017, according to data published this week by KPMG.
In its ‘Venture Pulse Q4 2017: Global analysis of venture funding’ report, KPMG states that the level of VC invested in Q4 ($23.75bn) – up from $21.24bn in Q3 2017 – helped to make 2017 the strongest year of VC investment since the dotcom bubble.
The strong VC investment in Q4 2017 was aided by the $1bn-plus funding rounds of three US-based companies: ride-hailing company Lyft ($1.5bn), cancer-screening biotech Grail Technology ($1.2b) and the automotive company Faraday Future ($1bn).
“In 2018, we expect VC activity in the US to build off the optimism and momentum that has returned to the US and global markets,” said Brian Hughes, national co-lead partner, KPMG LLP’s Venture Capital Practice in the US “This should also be helped by stronger exit markets in both IPO’s and M&A activity for VC-backed companies.”
The report also notes that deal volume declined in Q4 2017 – down from 1997 in Q3 2017 to 1778 deals in Q4 2017 – as investors focused on placing bigger bets on a smaller number of companies that they believed had a stronger path to profitability.
In addition to the three $1bn-plus funding rounds, the US also saw numerous $100m-plus rounds, with the top 10 deals accounting for more than one quarter of the total investment during the quarter.
In terms of sectors and industries, VC and corporate investor interest in healthtech and biotech grew significantly in 2017, with a number of large deals completed in Q4 2017. Healthcare companies also topped the charts in terms of exits, which helped boost overall activity.
“While there is no indication that we will return to the level of IPO activity we saw in 2015, there is a likelihood that 2018 will see an increased number of IPOs,” said Conor Moore, national co-lead partner, KPMG Venture Capital practice in the US. “However, the secondary market is poised to see even greater growth as many companies choose to remain private for longer.”
As far as global VC investment is concerned, a strong Q4 2017 across the Americas, Asia and Europe helped propel the global VC market to a record level of annual investment for 2017 of $155bn.