Sometimes startups are moving so quickly through the funding process that they may not take the time to take the pulse of the industry. Fortunately, we’ve done the work for you, poring through the National Venture Capital Association’s latest Venture Monitor to get the scoop on the VC funding trends that are taking hold this year.
NVCA created the report in concert with PitchBook, sharing data about the funding landscape specific to the second quarter of 2019, with additional stats on the entire first half of this year. Read on for five highlights essential to business owners.
1. The West Coast Is Still Hot – But the Bay Area May Be Cooling.
Although many reports indicate that cities outside the West Coast – such as Miami and Washington DC – are poised to dominate the VC landscape, the majority of the action is still in the west. About 58 percent of the deal value occurring during the second quarter of this year happened on the West Coast of the US. The Mid-Atlantic region comprised about 17 percent of the deal value, and then the Mountain, Southeast and Great Lakes regions were nearly tied at about 4.1 percent of deal value each. The South and Midwest rounded out the list, logging the lowest numbers.
However, it’s important to note that the West Coast values were not as heavily driven by the Bay Area as they’ve been in the past. In fact, the share of venture deals in the Bay Area fell to a 10-year low, while unicorn deals drove the New York metro region’s share of VC invested.
2. Healthcare Startups Dominated Early-Stage Funding.
During Q2, healthcare startups generated 33.7 percent of capital invested in early-stage ventures. These investments have ranged from health tech (such as AI and machine learning to improve care) to pharma and biotech firms, and includes cannabis-based medical products.3. AI Is Eating Software.
The use of artificial intelligence is no longer relegated to just one vertical, and venture capitalists are watching AI permeate other industries. “AI is embedded in the DNA of nearly every software startup today,” said Sulu Mamdani, managing partner with SVB Capital, in the NVCA report. “We are closely watching the intersection of AI and sectors such as cybersecurity, digital health and fintech.” In addition, he noted that he’s seeing growing trends in categories such as drones, robotics, blockchain, cryptocurrencies, autotech and spacetech.
Among the biggest late-stage deals during the quarter were several big investments in enterprise software, including $568 million raised for UiPath, which creates robotic process automation software.
4. Female Founders Could See Record Year.
If the venture capital trends continue as they have so far this year, 2019 could break records for VC funding of female-founded businesses. During the first half of 2019, $1.9 billion was invested into female-founded firms, whereas $3.1 billion was invested during all of 2018 – and that was an all-time high at the time.The US regions that have invested the most money into female-founded firms since 2006 are the Bay Area, followed by New York, Boston, Los Angeles and San Diego.
5. Exits Swelled During Q2.
Thanks to several high-profile IPOs including Uber, Pinterest, Slack and Zoom, the second quarter of 2019 saw over $130 billion in exit value, making this the largest quarterly exit value of all time, the report indicates. By sector, the most VC exits so far this year have come from software firms, while IT hardware and health care businesses also notched a large number of exits.
But Don’t Get Too Optimistic:
Although there were myriad strong exits this year, the NVCA warns that it has “seen some signs of fundraising cooling slightly.” Average fund sizes are shrinking and median fund growth slowed, the report notes. Resource:
To read the entire NVCA/PitchBook Venture Monitor for the first half of 2019, visit the NVCA’s website or read PitchBook's fact sheet.
Authors
Neha De
Neha De is a writer and editor with more than 13 years of experience. She has worked on a variety of genres and platforms, including books, magazine articles, blog posts and website copy. She is passionate about producing clear and concise content that is engaging and informative. In her spare time, Neha enjoys dancing, running and spending time with her family.