The venture capital-backed deal market has recorded its largest ever quarter, as 2,062 deals worth US$47bn were announced in the second quarter. Specialist data provider Preqin expects these figures to rise by around 5% as more information becomes available.
The second quarter of 2017 already surpasses the previous record of $43bn in venture capital-backed deals recorded in Q3 2015. Activity in the quarter was driven by record levels of dealmaking in Asia, which saw deals worth a total of $22bn announced.
This is almost half the global total. This makes it the fourth quarter since the start of 2015 in which Asia has surpassed North America to become the most prominent region for venture capital-backed deal value.
“The second quarter of 2017 has seen a record amount of capital deployed into venture capital-backed deals,” explains Felice Egidio, head of venture capital Products at Preqin. “This is particularly notable following the slowdown we saw in the second half of 2016.”
This reflects the changing nature of the global venture capital landscape, he adds. Asia accounted for the largest share of deal value for the fourth time in the last six quarters, and the largest venture capital deal ever recorded was in China.
The number of financings does not yet approach those seen in North America. But the region has now come into its own as an epicentre of this niche of the global alternative investment industry, he says.
Less exit success
However, the exit market for venture capital-backed companies does not seem to be enjoying the same level of success, he goes on to say. An increasing number of companies are choosing to stay private rather than being sold or going public
It is perhaps not surprising that we have seen a slowdown in the volume of exits since they last peaked in the latter part of 2015, he comments. However, venture capital funds, unlike private companies, have defined lifespans.
On expiry investors will expect to see return from their investments. “Fund managers will be looking for exit activity to regain some momentum in the coming quarters, or they may have to start looking for alternative ways to release capital back to investors,” he states.
Key Q2 deals and exit facts
- Q2 2017 saw 2,062 venture capital-backed deals announced worth a combined $47bn
- This surpasses the previous record of $43bn, seen in Q3 2015
- Asia saw 550 deals worth a total of $22bn
- This surpasses the $19bn seen for 936 deals in North America
- This is the fourth time in six quarters that Asia has recorded the highest deal value of any region
- Angel stage investments accounted for 28% of total deal flow
- Deals in software account for the greatest proportion of deal volume (31%)
- Telecoms deals represent the largest share of total deal value in Q2 (25%)
- The $5.5bn financing of Didi Chuxing in April is the largest recorded venture capital-backed deal
- Just 244 exits were recorded globally, worth a combined $14bn
- This is down from 293 exits worth $18bn the previous quarter
- Thirty-three venture capital-backed IPOs were announced in the quarter, worth 30% of overall exit value
- Trade sales account for by far the largest proportion of both exit volume (73%) and value (62%)
- The largest exit announced in Q2 was the $3.4bn sale of Chewy, Inc. to PetSmart, Inc. in April