Big Deals, Life Sciences Push U.S. VC in 2018 to Dot-Com Boom Levels

Xconomy National — 

[Updated 1/18/19, 3:27 pm. See below.] Venture capital investments rose in 2018 to levels not seen since the heady days of 2000, the last year U.S. startups collectively took in more than $100 billion.

That’s according to PitchBook and the National Venture Capital Association’s Venture Monitor report, released this week, which tallied nearly 9,000 deals made last year, through which venture investors sunk $130.9 billion into companies. That was about 500 fewer deals than in the year prior, but the total amount invested increased by $47.9 billion compared to 2017, continuing a trend of bigger checks going to fewer deals. (See below for lists of the top deals of the fourth quarter and the full year.)

The report tracked a total of 198 so-called “mega-rounds”—venture deals of $100 million or more—in 2018, nearly twice as many as the 104 such investments it tallied the year before. Median deal sizes climbed across the board, with early-stage, angel, and seed round totals rising as well as late-stage financings, the report found.

Nearly half of early-stage deals struck were for at least $5 million, and early-stage deals of $25 million or more made up more than 60 percent of the value of all such deals, the report noted.

A rival analysis, the MoneyTree report by CB Insights and PwC, came up with different end-of-year numbers, but a similar conclusion, noting the trend toward fewer, bigger VC deals in the U.S.

That analysis found that VCs put a total of $99.5 billion into companies over 5,536 deals in 2018—the lowest level of deal activity since 2013, according to the report.

The Venture Monitor report noted that investors honed in on deals in healthcare and artificial intelligence in the fourth quarter of the year, citing the $300 million Andreessen Horowitz-led Series B investment in Waltham, MA-based Medicare Advantage business Devoted Health, and the $179 million Series A investment in San Francisco’s Bright Machines, which makes manufacturing software.

In a continuation of an upward trend, the number of life sciences deals in 2018 made up 14.6 percent of venture deal flow, the Venture Monitor found. Of the capital invested in those deals, more than 60 percent of those funds came from deals of $50 million or more, the report said.

Software startups also had a strong showing, with record levels of capital investment and a greater proportion of VC deal flow than the year prior, even as deal count remained relatively unchanged from 2017, according to the report.

While the West Coast still attracted the majority of investment—39.5 percent of deal flow and 61.7 percent of the value—the Great Lakes and New England regions recorded year-over-year increases in deal count, the only two of the eight regions analyzed by the Venture Monitor to do so.

And while market volatility increased in the fourth quarter, the Venture Monitor report said there were about 500 VC deals, which together totaled a decade quarterly high of $30.8 billion. That total was juiced by San Francisco-based e-cigarette company Juul’s $12.8 billion haul. But even without that financing, the value of capital invested in the last quarter of the year was at a near-record level, according to the report.

Here are the top funding deals of the fourth quarter, according to the Venture Monitor report:

1. Juul (San Francisco): $12.8B
2. Epic Games (Cary, NC): $1.25B
3. Instacart (San Francisco): $871M
4. Automation Anywhere (San Jose, CA): $550M
5. Snowflake (San Mateo, CA): $450M
6. Relay Therapeutics (Cambridge, MA): $400M
7. Zymergen (Emeryville, CA): $400M
8. Fair (Santa Monica, CA): $385M
9. Devoted Health (Waltham): $300M
10. Coinbase (San Francisco): $300M [This deal added.—Eds.]

And here are the top funding deals of 2018, per Venture Monitor:

1. Juul: $12.8B
2. Faraday Future (Los Angeles): $2B
3. Lyft (San Francisco): $1.7B
4. Epic Games: $1.25B
5. Uber (San Francisco): $1.25B
6. Juul: $1.235B
7. WeWork (New York): $1B
8. Magic Leap (Plantation, FL): $963M
9. Instacart: $871M
10: Katerra (Menlo Park, CA): $865M