Venture investing is getting harder
We received a great presentation from the NVCA that reviewed the venture capital market in 2018. One of my favorite slides along with commentary is below.
New VC Funds. The number of new VC funds in 2018 was roughly flat with 2017 and lower than the figure from 2014 to 2016. 256 new funds is materially lower than the ~300 closed in 2016, meaning the sources of VC capital has declined. It should be noted that the median size of VC funds in 2018 was $82mm, a recent high, so while there are fewer funds, they have plenty of cash.
Angel & Seed Deals. Angel and seed deals closed is on the decline. The slope of the line is dramatic, so the drop off rom 2017 was quite strong. Interestingly seed deals have been on the decline since 2014. Angel and seed investing is hard (these are the riskiest stages), so any time we see a decline, we’re not surprised. It seems these investors may be getting more selective or taking a short breather.
The Exit Data. The exit data is most interesting to us. Acquisitions by corporations are down for the third year in a row to 604. That’s not a lot of acquisitions and materially lower than the ~800 high shown in the chart. M&A by corporations is still materially higher than the number of exits to private equity or via IPO. While private equity firms in some cases are outbidding corporations, they’re not doing as many deals.
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