This is not good news for early-stage entrepreneurs.
Seed activity for U.S. startups declined for the fourth straight year but median deal sizes increased at every stage of venture capital, according to a new report from venture data provider CB Insights and PwC’s MoneyTree.
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In 2018, seed activity as a percentage of all deals shrank from 31 percent to 25 percent — a decade low — while the share and size of late-stage deals swelled to record highs, Techcrunch reported.
Total venture capital funding globally was way up, however, by 21 percent to $207 billion. Deal activity increased by 10 percent to 14,247 transactions.
On the other hand, the U.S. saw the highest on record for the median U.S. seed deal, growing to $2.1 million at the end of 2018. The same was true for early-stage financing such as Series A and Series B fundings, which grew to a median of $8 million in Q4. This was a major boost from the $5.5 million median of Q1 2017.
Mature companies benefited the most. There has been an increase in fresh billion-dollar funds.
“Firms in the $100 million-to-$500 million range are currently the most active fundraisers,” Techcrunch reported. “Investors at those funds aren’t able to deploy small bits of capital into early-stage startups — not only because the return on the investment isn’t meaningful, but they don’t have the time to devote to those projects, which typically require more support and oversight than their late-stage counterparts.”
Not much has changed since 2017 when venture capital firms invested $71.9 billion, but deals declined.
The MoneyTree Report from PricewaterhouseCoopers and CB Insights for 2017 found that although the value of transactions was up, the number of deals fell for the third consecutive year, to 5,052, down 4.1 percent from 2016 and the lowest annual total since 2012, Pensions & Investments reported.
Megarounds — venture capital investments of $100 million or more — went up to 109 in 2017, up from 107 in 2015, representing 36 percent of total U.S. funding in 2017.
“2017 closed strong because of megaround activity — a theme throughout the year. It was a record year for these megarounds and was driven by what we’d describe as the Softbank effect. This is the entry of large, deep-pocketed investors, ranging from Softbank to sovereign wealth funds from around the globe investing in insurgent startup companies,” said Anand Sanwal, co-founder and CEO of CB Insights, in a statement.
