SA国际传媒

In VC pitch meetings, startups are typically expected to show a chart that looks like a hockey stick: up and to the right with an increasing rate of change. Because to be a startup is to play the game of growing fast and making things.

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Looking back at the last decade, it鈥檚 fitting, then, that the worldwide VC market accelerated as well.

According to SA国际传媒 projections, over $1.5 trillion was invested in venture capital deals, worldwide between 2010 and 2019, with most of that coming in just the past few years.

In 2019 alone, SA国际传媒 projects that roughly $294.8 billion was invested in nearly 32,800 deals across the venture spectrum – from tiny pre-seed and 鈥渟prout鈥� rounds to supergiant pre-IPO technology growth deals struck with private investors before a public market debut.

In the chart below, we plot projected dollar volume, aggregated by year, over the past decade.

And here鈥檚 deal volume from the past 10 years.

When it comes to deal volume, 2019 closes out the 2010s on a high note. More venture deals were struck last year, worldwide, than in any year prior. With respect to dollar volume, 2019 remains the second-most active year on record. Take out some of the largest outlier rounds from 2018 (including round raised by Chinese fintech firm , a for WeWork, and for China-based TikTok-maker ) and the gap doesn鈥檛 seem that big.

But this is not, ultimately, a report looking back at the decade as a whole. Here, we鈥檒l mostly focus on what happened in the last quarter of 2019, with some general facts, figures and commentary about last year interspersed throughout. We鈥檒l divide this report into two main sections: Money In and Money Out, covering startup activity from first check to exit.

Money In

Pace of Dealmaking

SA国际传媒 projects that there were 8,183 venture rounds struck in Q4 2019, down slightly from an all-time high set in the third quarter. Since the first quarter of 2018, total projected venture deal volume has hovered in a rough range of 7,500 to 8,500 rounds per quarter and hasn鈥檛 experienced notable upward or downward movement on a consistent basis. In other words, despite minor variations and small upswings and downtrends, global venture deal volume has largely stabilized over the past couple of years.

Alongside the stabilization in overall venture deal volume, there is another metric which has also stabilized: the relative 鈥渂alance of power鈥� in deal volume between North America and the rest of the world.

Of the projected deal count totals, the geographic split between North America and the rest of the world remained relatively stable over time. What that means, at this most abstract level, the U.S. and Canadian market rose and retreated at roughly the same relative pace as the rest of the world.

Of course, the 鈥渞est of the world鈥� is a big place. Fortunes rise and fall with economic cycles. A decline in Chinese startup fundraising may be somewhat offset by gains in Latin America and Europe, and other markets around the world. Summed up and averaged out, though, the fact remains that North America still enjoys a plurality, if not a majority, of global venture deal volume through the end of the 2010s.

Projected VC Dollar Volume

SA国际传媒 projects that roughly $80.74 billion were invested worldwide in Q4 2019, up from last quarter but still below all-time highs set in 2018.

Like with deal volume, global venture dollar volume has plateaued in the past couple years, which is somewhat expected given how late into the current bull cycle we find ourselves today. Many of the most capital-hungry companies from the last decade have either already graduated to public markets or hit roadblocks which stymied growth and, accordingly, may simultaneously diminish the amount of capital they need from private-market investors and their likelihood of successfully securing said financing going forward.

How the world鈥檚 VC dollars get split geographically is changing over time.

At 39 percent in Q4 2019, North America鈥檚 share of global deal volume is the lowest it鈥檚 been since Q2 2018. And, much like deal volume over the slightly longer run, the majority of dollar volume is now raised outside North America. Because of the highly variable nature of large funding rounds (which can extend into the $100 million to $1 billion-plus range) the quarter-to-quarter fluctuations are more pronounced, but the overall trend is clear: startups in the rest of the world are raising more, and rising fast on the global stage.

Most Active Lead Investors

In any given round of startup funding, there鈥檚 often more than one investor involved, and not all investors have the same level of involvement in the deal. It鈥檚 typically the case that one investor – or sometimes two or three – will write a larger check than the other investors, and/or shoulder more of the burden of due diligence, term negotiation and the logistics of closing a deal.

Looking at the investors who have led the most deals over a given period of time is one way to identify some of the most active players in the venture game.

Most deals in SA国际传媒鈥檚 funding rounds data list the investor(s) which led the transaction. In the chart below, we show the number of early and late-stage rounds led by the most active lead investors in the venture world in 2019 as a whole.

Note that this is based on a snapshot of SA国际传媒鈥檚 funding rounds dataset at the time of writing. These numbers (and indeed the ranks) may shift over time as historical funding data is surfaced and added to SA国际传媒. If you re-run these numbers at some point in the future, don鈥檛 be surprised if they鈥檙e a little different from what鈥檚 displayed below.

We didn鈥檛 count round leadership in angel and seed-stage deals either. Big accelerator programs like , and , among others, invest in dozens or hundreds of startups per year. Even though accelerators typically invest a de minimis amount of capital and often co-invest alongside syndicate partners, they鈥檙e traditionally listed as the round leaders because they originated the deal. Although we鈥檒l show the most active seed-stage investors in a later section, we opted to exclude them here.

Otherwise, this list pretty much consists of 鈥渢he usual suspects:鈥� Sand Hill Road stalwarts, corporate investors from the U.S. and China, a handful of China-based firms and, of course, and its .

Between its primary and franchise operations in China and India, continues to be one of the most prolific investors on the planet. The firm has been on a fundraising tear, disclosing $3.35 billion in dry powder secured for funds aimed at in the U.S. as well as and investments in China, according to SA国际传媒 News coverage of SEC filings by Sequoia from December 2019.

Other investors in the most active ranks have also raised (or started raising) new funds this year.

Perhaps one of the bigger stories (and funds) to come out of 2019 was 鈥檚 , which topped out at $2 billion and was announced in May alongside $750 million for . It鈥檚 considered an important moment because the venture firm restructured itself as a . As we explained in our Q2 2019 Global VC Report, 鈥淭he designation gives these firms more options to invest their LPs鈥� capital in search of outsized returns鈥攁t the expense of the relative freedom from regulatory oversight enjoyed by less-regulated venture capital funds.鈥�

There were other funds raised as well:

• was perhaps the most prolific, announcing $525 million for , $500 million for , $1.5 billion for , $550 million for , and $575 million for , all between May and October.
• , a PE and late-stage venture investment firm, raised in November.
• In March, submitted a filing disclosing its intent to raise $3.6 billion for its 17th venture capital fund.
• filed to raise back in February.
• filed paperwork indicating it鈥檚 raising an undisclosed sum for what it鈥檚 calling its 鈥溾�� in September.

Stage-By-Stage Analysis of Q4 2019 VC Funding Trends

In our stage-by-stage analysis, we鈥檒l start close to the entrepreneurial metal with seed-stage deals. From there, we鈥檒l proceed up the capital stack, ending with the late-stage venture and pre-IPO private equity deals that typically cap off the financial histories of private companies before they graduate to raising from public markets.

Angel And Seed-Stage Deals

Deals at the angel and seed 鈥渟tage鈥� represent several types of transactions, including those labeled 鈥減re-seed,鈥� 鈥渟eed,鈥� 鈥渁ngel鈥� and a subset of rounds under a certain dollar threshold from other transaction types including equity crowdfunding and convertible notes. For more information about how SA国际传媒 aggregates data for this report, check out the Methodology section at the end of this report and the Methodology page on SA国际传媒 News.

SA国际传媒 projects that 20,434 angel and seed-stage rounds took place in all of 2019, setting a new record for worldwide deal volume at this stage. Throughout 2019, SA国际传媒 projects that $15.7 billion was invested in angel and seed-stage deals, up 5.5 percent from the prior year.

As for the last quarter of the year, angel and seed-stage activity ended strong. Although deal volume is down from last quarter鈥檚 all-time high, dollar volume hit a new record. SA国际传媒 projects that approximately $4.47 billion was invested across 5,076 deals in Q4 2019.

Reported data from SA国际传媒 indicates that angel and seed-stage deals continue to grow in size as more capital flows upstream.

Even though we鈥檙e talking about relatively small dollar figures here, growth in seed-stage round size is remarkable. In part, it鈥檚 because seed stage has become something of a semantic mess, meaning that we鈥檙e calling some rounds seed that, in the past, might have been called something else.

Traditionally, seed rounds were small (usually less than $1.5 million-$2 million, depending on the market) and unpriced, meaning that companies weren鈥檛 assigned a valuation. It鈥檚 hard to put a price on a company which, at this stage, is often little more than a proof-of-concept with maybe a little bit of market validation. These days though, the definition of seed is changing and has come to include priced rounds and larger deals. SA国际传媒 News has documented a growing trend of 鈥渟upergiant seed鈥� rounds in the U.S., but it鈥檚 a global phenomenon. At the time of this writing, there were , worldwide, up from 324 in 2018, and 227 in 2017.

And here are some of the most active investors in angel and seed-stage deals, worldwide.

There are few surprises here. Many of the most active investors on this list are accelerator programs, which are in the business of investing in startups at scale. Y Combinator, with its increasingly huge batch sizes, tops this list, with (which bills itself as 鈥淭he Accelerator VC鈥�) and 500 Startups trailing behind in the ranks.

Note that the above is based on a snapshot of SA国际传媒 data captured at the beginning of January 2020. Seed-stage deals in particular are subject to reporting delays for many reasons: stealthy startups want to stay stealthy, small rounds may fail to garner press attention, and/or a company may not have yet created a SA国际传媒 profile and disclosed their funding history. Reporting delays are a factor in all sets of private market investment data, and the numbers (or even ranks) reported above are likely to change as historical deals get added to SA国际传媒 data over time.

Early-Stage Deals

Early-stage deals consist primarily of Series A and Series B rounds, with a subset of other round types included in the mix. (Again, for more information, check out the Methodology section at the end.)

SA国际传媒 projects a total of 9,892 early-stage deals were struck in 2019, worldwide. That’s down slightly, nearly 4.6 percent, from 2018’s projected high of 10,367 rounds. The past year saw a total of $48.95 billion in early-stage funding, according to SA国际传媒 projections. That’s up 6.25 percent from 2018’s projected total of $46.07 billion.

The world鈥檚 early-stage venture market closed out the year a little better than where it started, but still mostly flat. SA国际传媒 projects that $29.78 billion was invested across 2,480 deals in the fourth quarter.

Deal and dollar volume growth continue to accelerate outside North America. In Q4 2019, SA国际传媒 projects that 60.2 percent of the early-stage dollar volume and about 58.7 percent of the deal volume was invested in startups in the rest of the world – up from 51.9 percent and 54 percent, respectively, in Q4 2018.

With deal volume on a slight downtrend, the only reason dollar volume is growing is due to larger early-stage round sizes.

Although the changes from one quarter to the next may be a bit humdrum, a year-over-year comparison really shows the power of compounding growth. What鈥檚 interesting to look at here isn鈥檛 the average, which can be skewed by outliers, rather it鈥檚 the median, which measures the statistical midpoint of a distribution, in this case the set of early-stage rounds raised in any given quarter. In general, a rising median value over time suggests that, here, the number of companies raising early-stage rounds today may be lower but the amount of capital they do raise is higher than it was before.

Which firms were the most active investors in these deals? The chart below has some answers, displaying the count of rounds to which the most active investors committed capital. (Again, early-stage deals are subject to reporting delays and these numbers are likely to change as historical funding rounds are surfaced and added to SA国际传媒 over time.)

The chart above has a lot of big-name VCs near the top of the ranks. They鈥檙e many of the same firms listed earlier, in the Most Active Lead Investors section of this report.

What鈥檚 interesting about this chart is that it illustrates the business model of accelerator programs quite well. Accelerator programs typically get an outsized chunk of equity for the relatively small amount of money they invest in participating startups. Those startups that survive to raise a Series A are then typically obligated to include the accelerator in the next deal, pursuant to pro rata rights which come standard in most accelerators鈥� term sheets.

Many accelerator programs follow on through Series A or Series B, but rarely beyond that. Some programs, like Y Combinator, have dedicated funds earmarked for continued investment in later-stage alumni companies, and others may selectively form special purpose vehicles to back their biggest successes on a one-off basis. But, generally, it鈥檚 rare to see seed investor participation at later stages.

Late-Stage Deals

Late-stage deals include Series C, Series D, Series E and later letters down the alphabet, plus a subset of other round types. And, since Q4 2017, we鈥檝e defined 鈥渢echnology growth鈥� deals as the set of private equity deals struck with companies which previously raised a venture capital round. In both cases, late-stage venture and technology growth deals are typically meant to fund more mature companies as they either continue to grow or seek to stabilize prior to raising from public markets or seeking an acquirer.

Unlike in prior sections, which started with discussion of annual totals, we鈥檒l start here with quarterly trends. In any given quarter, there aren鈥檛 that many of these deals. The projected 572 late-stage venture deals and 55 technology growth deals in Q4 2019 made up 7 percent and 0.7 percent, respectively, of total investment transaction volume last quarter. But the size of these deals, collectively, weighs heavily on the market. The roughly $42.35 billion in late-stage venture dollar volume for Q4 2019 represents about 52.4 percent of total projected dollar volume for the quarter. The $4.15 billion invested in Q4 2019鈥檚 technology growth deals accounts for 5.1 percent of dollar volume.

Relative to the start of the year, the global late-stage venture market ends 2019 in a slightly better position, but still significantly lower from the high-flying days of 2018.

The projected $42.35 billion in Q4 2019 late-stage venture dollar volume is nearly 13 percent lower than the same quarter鈥檚 total from last year. Q2 2019鈥檚 dollar volume total of $34.8 billion, the low-water mark this past year, is roughly $15.7 billion less than a projected $50.5 billion record set in Q2 2018.

Late-stage round sizes are roughly where they started at the beginning of the year. Average round size in Q4 2019 is up from the year鈥檚 low point in Q2 but is down relative to 2018.

Continuing the earlier theme of larger deal sizes throughout the market, we can see that median deal size at late stage continues to grow.

And here is the deal and dollar volume for technology growth. The relatively small number and variable size of these deals makes sussing out larger trends difficult, but we felt it was still worth sharing these numbers.

And, as promised, here are the annual numbers: 2,450 late-stage and technology growth deals occurred in 2019, according to SA国际传媒 projections, setting a new annual record. Gains in deal volume were relatively modest: up a projected 3.4 percent from the prior year.

SA国际传媒 projects that for all of 2019, a cumulative $165.78 billion was invested across late-stage and technology growth deals. Here we find full-year 2019’s only marked sequential decline: down $38.5 billion, or 18.8 percent, from 2018’s all-time high of $204.28 billion in combined late-stage venture and technology growth dollar volume.

Declines in 2019’s late-stage dollar volume is not attributable to a pullback in deal volume, but rather to a fairly significant decline in the average, but not the median, transaction size at this stage. Falling means and rising median deal size suggests that while late-stage and technology growth deals are getting slightly larger, as a “population,” there are fewer outliers on the very highest end of the dollar volume spectrum to skew means higher.

Who鈥檚 backing these deals? This will probably come as no surprise: some of the deepest pockets in the VC business.

Reporting delays are less pronounced at late stage, but these numbers may shift slightly as new data is added to SA国际传媒 over time.

Money Out

When it comes to investing paper gains are great, but realizing those capital gains is the goal. In the public stock market, it鈥檚 possible to enter and exit a position in milliseconds. In private investing markets, it can take weeks to negotiate and finalize a deal, and as much as a decade to actually see the upside (if there鈥檚 any) from any given investment.

Venture capitalists are tasked with investing money on behalf of their limited partners, the money behind the money. If you thought getting money into a company was a challenge, try getting it out. Initial public offerings (IPOs) and mergers and acquisitions (M&A) are the two traditional paths to liquidity for private market investors, and that鈥檚 what we鈥檒l primarily focus on here.

It鈥檚 sometimes possible for early investors and employees to sell their shares on the secondary market, without an exit for the company as a whole, but these transactions typically go unreported and, accordingly, are rarely surfaced in private company funding data.

Venture-Backed Acquisitions

Exit by way of merger or acquisition is the most common path to liquidity for venture capital investors.

Here鈥檚 a chart plotting SA国际传媒 data for venture-backed acquisitions, through Q4 2019. This is based on data currently in SA国际传媒, not based on projections.

For at least the past year, SA国际传媒 News has acknowledged the decline in M&A volume for venture-backed startups. We鈥檝e observed this phenomenon on a quarterly scale, but it looks like the declines are now made manifest on an annual timescale. Between 2009 and 2018, the number of M&A transactions involving venture-backed startups on the sell side grew year by year.

SA国际传媒 lists 435 acquisitions of venture-backed companies in 2009. That number grew over the course of nine years to 1,521 transactions in 2018. The 1,453 transactions reported for all of 2019 marks not just the first annual decline in transaction volume; it comes in lower than the 1,473 transactions reported all the way back in 2016. Put more bluntly, data suggests that the startup acquisition market erased years of growth in 2019, which may leave companies (and their financial backers) with more limited exit opportunities going forward.

Initial Public Offerings

An exit onto public markets is the other traditional path to liquidity for private investors. There was a time when an IPO was the only way to go, but other ways to get shares in the portfolios of the public have emerged.

Direct listings are a trendy, if still seldom-used path to public markets. In the traditional IPO process, leadership from the company seeking to go public makes a pitch to investment banks which underwrite and syndicate the offering and manage the logistics. In an IPO, the company is raising money from its underwriters, and existing investors are given the opportunity to convert their private shares into publicly traded ones, which can be liquidated for cash following the customary lock-up period.

A direct listing largely involves the same process, but without the underwriting component of a traditional IPO transaction. The company may not raise fresh cash in a direct listing, but it has a first-hand role in setting the price at which retail investors get to buy in. And, importantly, it gives prior investors the liquidity they need to fulfill LP obligations, and employees the opportunity to cash out and buy a house, invest, or save.

Here鈥檚 a selection of notable IPOs from Q4 2019.

Conclusion

Private market investment grew to massive scale and dizzying speed over the past decade. Spurred on by technical innovation (smartphones, the scale-out of high-speed wireless networks, cloud computing, the commodification of machine learning, robotics, gene editing, etc.) and pushed by economic tailwinds (the longest sustained period of economic growth in modern history, low interest rates, tax regimes which favor the wealthy, etc.), a number of factors came together to make the 2010s one of the most exciting times to use, work with, and invest in new technology companies.

The new year, however, starts off somewhat rocky. Geopolitical instability in the Middle East, ecological disaster in Australia, the unresolved fate of the current U.S. presidential administration and ongoing indecision around Brexit all rang in 2020. Although any one of these factors is unlikely to affect the venture investment market directly, it鈥檚 important to remember the importance of sentiment. It鈥檚 funny how turmoil today affects the decision-making of investors who are ostensibly tasked with seeing years into the future, but VCs are people too. And that鈥檚 just how it is.

Whatever may come in the 2020s, it鈥檚 bound to be venturesome.

Methodology

The data contained in this report comes directly from SA国际传媒, and in two varieties: projected data and reported data.

SA国际传媒 uses projections for global and U.S. trend analysis. Projections are based on historical patterns in late reporting, which are most pronounced at the earliest stages of venture activity. Using projected data helps prevent undercounting or reporting skewed trends that only correct over time. All projected values are noted accordingly.

Certain metrics, like mean and median reported round sizes, were generated using only reported data. Unlike with projected data, SA国际传媒 calculates these kinds of metrics based only on the data it currently has. Just like with projected data, reported data will be properly indicated.

Please note that all funding values are given in U.S. dollars unless otherwise noted. SA国际传媒 converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events as reported. Even if those events were added to SA国际传媒 long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of Funding Terms

• Seed/Angel include financings that are classified as a seed or angel, including accelerator fundings and equity crowdfunding below $5 million.
• Early stage venture includes financings that are classified as a Series A or B, venture rounds without a designated series that are below $15M, and equity crowdfunding above $5 million.
• Late stage venture includes financings that are classified as a Series C+ and venture rounds greater than $15M.
• Technology Growth includes private equity investments with participation from venture investors.

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