Second highest year of global VC investment ever at $257 billion
TORONTO, Jan. 15, 2020 /CNW/ - The final quarter of 2019 brought a small uptick in VC investment globally, with $63.1 billion in VC investment across 4,289 deals, led by a $6.55 billion corporate investment in The We Company – a strategic investment by Softbank following WeWork's failed IPO. Given the array of political and economic uncertainties affecting most regions of the world in Q4'19, it is notable that the Americas, China, India, and Europe all saw at least one $1 billion+ deal during the quarter.
As a whole, 2019 was a very strong and relatively stable year for VC funding, with $257 billion raised across the globe – the second highest level on record next to 2018's over $300 billion, according to the Q4'19 edition of KPMG Private Enterprise's Venture Pulse report. The robust results are notable given the year did not include any massive $10 billion+ megadeals like those raised by Juul ($12.8 billion) and Ant Financial ($14 billion) in 2018.
"The results highlight the strength that comes with having a diversity of growing startup ecosystems around the world. While different jurisdictions may have experienced challenges at different points of 2019, VC investment in others picked up the slack," explained Kevin Smith Co-Leader, KPMG Private Enterprise Emerging Giants Network, KPMG International and EMA Head of KPMG Private Enterprise. "Europe, in particular, shattered its previous annual high of VC investment, attracting $37.5 billion in 2019 and set a new record, with 18 new unicorns in 2019 compared to 12 in 2018 and only 6 in 2017. The breadth and diversity of Europe's VC market and growing innovation ecosystems continued to attract deep pocketed investors from across the globe, with companies in the UK, Germany, the Netherlands, Spain, Lithuania, Israel, and France all attracting $100 million+ funding rounds."
Global VC investment rose from $62 billion across 5,453 deals in Q3'19 to over $63 billion across 4,289 deals in Q4'19. The US alone accounted for more than half of VC investment globally during
Q4'19, with $34.2 billion of investment across 2,215 deals.
At a regional level, the Americas led VC investment in Q4'19, with $36.2 billion raised across 2,400 deals. Asia followed with $18.7 billion raised across 1,021 deals, while Europe saw $9 billion raised across 804 deals.
The largest deals this quarter occurred in three different countries: US-based The We Company ($6.5 billion – corporate investment), China-based Tenglong Holding Group ($3.7 billion – Series A), and India-based PayTM ($1.7 billion – Series G).
The percentage of investment by corporates reached an all new high in Q4'19, with corporates participating in 29.4% of all VC deals globally.
Key 2019 Annual Highlights
For the third consecutive year, global median deal sizes rose across all deal stages in 2019 – to $1.7 million for seed/angel deals, $8 million for early stage deals, and $10.3 million for later stage deals.
The global median deal size for Series D and higher was $58 million in 2019, up from $50 million in 2018 – and more than triple the $15.9 million it was in 2013.
For the third year in a row, global median pre-money valuations rose across all deal stages in 2019, including to a massive $423.5 million for Series D or later rounds. Other global median pre-money valuations were $7 million for seed stage rounds, $22 million for Series A, $70 million for Series B, and $150 million for Series C deals.
The number of global first-time venture financings of companies dropped for the fifth year in a row – to 5,878 in 2019. Deal value in 2019 was $23.9 billion – second only to 2018's $29.7 billion. The combination suggests that investors are scrutinizing deals heavily and investing more in companies with stronger business fundamentals.
US continues to dominate investment in Americas
VC investment in the Americas rose slightly, from $34.6 billion in Q3'19 to $36.2 billion in Q4'19. The largest deals in the Americas came from the US, including the $6.5 billion corporate investment in The We Company, a $700 million raise by Door Dash, a $635 million raise by Bright Health, and a $500 million raise by Magic Leap. The 10 largest deals in the US spanned numerous sectors, including real-estate, food delivery, health care, virtual reality, fintech, publishing, and logistics. The top deals also showed strong geographic diversity, with several deals well outside of Silicon Valley – such as in Florida (Magic Leap), Minneapolis (Bright Health), Seattle (Convoy), and Portland (Vacasa).
Despite small quarter-over-quarter declines in VC investment, Canada and Brazil both saw strong VC investment for the year as a whole, including a number of $100 million+ megadeals during Q4'19. In Canada, top deals included a $200 million raise by Toronto-based password management company 1Password. In Brazil, annual VC investment grew year over year – from $1.7 billion in 2018 to almost $2.1 billion in 2019 – setting a large new annual record. Brazil also saw three new unicorns created in 2019, including three in Q4'19: Loggi, QuintoAndar and Wildlife Studios.
Europe shatters annual record for VC investment
Europe shattered its previous annual high of VC investment, attracting $37.5 billion in VC investment in 2019 compared to $28.2 billion in 2018. After setting a new quarterly record of $10.8 billion in VC investment in Q3'19, VC investment dropped to $7.9 billion in Q4'19 – still a very robust amount for the region.
The UK proved fundamentally resilient to concerns around Brexit, attracting a record high $11.9 billion in VC investment during 2019, including more than $2.5 billion in Q4'19. Large deals in Europe during Q4'19 included a $525 million raise by UK-based Deliveroo, a $284 million raise by Celonis in Germany, and a $276 million raise by Picnic in the Netherlands. Germany, France, and Spain also reached new annual records for VC investment in 2019.
VC investment in Asia falls year-over-year
After achieving a massive record of $126 billion in 2018, Asia-based VC investment fell to $73 billion in 2019. On a quarterly basis, VC investment rose slightly to $18.7 billion in Q4'19, led by a $3.7 billion Series A round by Tenglong Holding Group in China, a $1.7 billion raise by PayTM in India, and a $1 billion raise by China-based Beike.
VC investment in China remained steady quarter-over-quarter at $11.1 billion, although the two largest deals in China accounted for $4.7 billion of this total during Q4'19. With four consecutive quarters of growth – including its second highest quarter of investment in Q4'19 ($4.6 billion), India achieved a new annual record high of over $12.5 billion in VC investment in 2019. Australia also saw its second-highest quarter of VC investment in Q4'19 ($339 million).
Future outlook positive, yet cautious
The challenges associated with WeWork's IPO, combined with the mixed results associated with other unicorn IPOs during 2019 raised significant concerns regarding the profitability of companies – particularly unicorn companies on the path to IPO. These concerns will likely have VC investors undertaking more due diligence with respect to potential deals. Companies without strong business models and paths to profitability will likely find it more challenging to raise funds in the future.
"In 2019, we saw numerous unicorn companies IPO with a broad range of outcomes. Over the next few months, we'll likely see this IPO activity continue as companies look to get out before the November presidential election in the US," said Conor Moore, Co-Leader, KPMG's Emerging Giants Network. "However, we are going to see companies, particularly consumer-focused companies, taking some time to put their financial house in order and to really prove the unit economics of their business models to investors. Profitability or a clear path thereto is going to be a key success factor for IPOs moving forward."
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