Third-Quarter Report Shows Slowdown in VC Activity, & Top 10 Deals

Venture capital activity is gradually easing from last year’s peak, according to a new quarterly report put together by Seattle-based PitchBook and the National Venture Capital Association.

VC firms invested $14.99 billion in 1,810 U.S. deals (1,796 companies) during the third quarter that ended September 30, according to the inaugural “Venture Monitor” report released today.

It was the fifth straight quarterly decline in the number of companies getting VC funding, according to the report. Third-quarter funding fell by nearly a third from the prior quarter, when venture investors deployed $22.14 billion in 2,034 deals (2,026 companies).

PitchBook data also shows a nearly 29 percent decline in year-over-year funding, from the $21.1 billion that was invested in 2,559 deals (2,545 companies) in the third quarter of 2015.

Despite the slowdown in venture dollars and deal flow, 2016 is still on pace—with roughly $56 billion invested in 5,997 deals so far this year—to end the year with more than $70 billion invested nationwide. That would be second only to the $78.9 billion that venture firms invested in 2015, according to PitchBook records that began in 2000. Meanwhile, this year’s deal count is declining sharply, a sign that venture investors are still writing bigger checks for fewer deals.

In a Venture Monitor statement today, PitchBook founder and CEO John Gabber said, “Promising companies like Moderna Therapeutics, Zoox, and OfferUp have demonstrated that quality targets are having no trouble closing sizable financing rounds.” (A list of the quarter’s top 10 deals is below.)

Venture capital firms also are having no trouble raising funds. According to Venture Monitor, VCs have raised $32.4 billion in 201 funds so far this year. Six of those funds have raised at least $1 billion this year, including $2.5 billion raised by Technology Crossover Ventures’ Internet fund and $1.6 billion raised by Andreessen Horowitz.

Software companies continue to attract the most attention from venture investors, with 2,122 companies drawing in roughly $27 billion so far this year and accounting for nearly half of all invested capital.

Exits by venture-backed companies continue to decline, with 162 exits of all types generating $14.6 billion in liquidity for VCs during the third quarter. Strategic acquisitions and buyouts accounted for 91 percent of all venture-backed exits last quarter, according to Venture Monitor.

Through the third quarter, venture firms have realized $38.6 billion from exits so far this year.

Angel investors in seed-stage deals accounted for just over half of all the financings, with early stage deals accounting for 30 percent and late-stage deals accounting for 19 percent of the total deal flow.

Here is a list of the top 10 deals of the quarter, based on PitchBook data:

Moderna$474 million (Late)Cambridge, MAPharma/Biotech
Solar Mosaic$220 million (Series C)Oakland, CAFinancial
Zoox$200 million (Series A)Menlo Park, CATransportation
FreshDirect$189 million (Late)Long Island City, NYRetail
Carbon$181 million (Series C)Redwood City, CA3D Printing
Unity Technologies$181 million (Series C)San Francisco, CASoftware
StackPath$180 million (Series A)Dallas, TXSoftware
Compass Therapeutics$170 million (Series A)Cambridge, MAPharma/Biotech
MetroMile$153 million (Series D)San Francisco, CAInsurance
Draft Kings$153 million (Late)Boston, MASoftware


Bruce V. Bigelow was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Follow @bvbigelow

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