VC Funding Slows as Big Funds Crowd into Late-Stage Venture Deals

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that late-stage investments into VC-backed companies are increasingly the provenance of new types of investors (hedge/mutual fund, sovereign wealth funds, private equity) and not late-stage VCs,” CB Insights says in today’s report.

The consequences can be seen in late-stage megadeals in Uber, Snapchat, and Lyft, which lacked VC participation. CB Insights found that Series B stage deals reached a five-quarter high, accounting for nearly a fifth of the 805 venture deals.

There were just 12 IPOs by venture-backed companies during the first quarter, compared with 24 in the prior quarter. Most of them (83 percent) were healthcare and biotech related. California-based companies accounted for two-thirds of the IPOs, with the rest coming from Massachusetts. CB Insights notes that New York has not had a venture-backed IPO in three of the past five quarters, although Etsy’s IPO is expected soon.

Of the 12 venture-backed IPOs, Box was the only billion-dollar technology company to go public. Meanwhile, seven private technology companies joined the billion-dollar unicorn club during the quarter.

CB Insights also counted 126 buyouts of venture-backed companies during the quarter. Combined with the dozen IPOs, CB Insights said there were 138 venture-backed exits in the first quarter, an almost 19 percent decline from the 170 exits counted in the previous quarter.

NEA was the most-active venture investor during the quarter, followed by Andreessen Horowitz and First Round capital.

Most Active VC Investors (CB Insights)

Most Active VC Investors (CB Insights)

Venture investments in Internet companies accounted for the biggest percentage of venture dollars and deals, as VCs poured almost $5.6 billion into 357 deals. Funding increased by 18 percent over the prior quarter, when VCs invested about $4.7 billion, but the Internet deal count declined for the fifth straight quarter, to the lowest level since 2011. CB Insights said the five biggest Internet deals of the quarter were: Pinterest, $367 million; Social Finance, $200 million; Lynda, $186 million; SimpliVity, $175 million, and Accela, $143 million.

Investments in healthcare-related companies accounted for the next biggest chunk of venture capital in the quarter, with nearly $2 billion going into 131 deals. That was a third more than the nearly $1.5 billion that went into healthcare in the year-ago quarter. The biggest deal went to Allergen Research Corp., which raised $80 million, and was one of six healthcare deals that raised $50 million or more.

For the first time since 2013, less than half of the healthcare deals were in California and Massachusetts, as 44 percent of healthcare deals during the quarter took place outside the major tech centers. Most of those deals involved companies based in Missouri, North Carolina, Pennsylvania, and Tennessee.

VCs invested more than $1.3 billion in the mobile and telecom sector, and CB Insights says healthcare, wellness, and security startups claimed 21 percent of the 139 deals.

CB Insights says the dollars and deals in cleantech picked up slightly during the quarter, with a total of $345 million going to 33 companies. California accounted for nearly half of the deals, but Colorado moved into the number two spot with 9 percent of the deal total. California accounted for over $200 million, or more than 60 percent of the total invested in green technology. Michigan ranked second in terms of dollars, due to investments in Sakti3 and Algal Scientific.

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