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Global analysis of
venture funding
13 July 2017
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Welcome to the Q2’17 edition of the KPMG Enterprise Venture Pulse
Report. In this quarter’s report, we highlight the key trends,
opportunities and challenges facing the venture capital (VC) market
globally and in key regions around the world.
Despite an ongoing decline in the number of VC deals globally, there
was a major uptick in VC investment during Q2’17. A significant
number of mega-deals in all regions helped drive this funding
increase, including China-based DidiChuxing’srecord-shattering
$5.5 billion funding round. Given the return of global mega-deals, it
comes as no surprise that this quarter saw the birth of 16 new unicorn
companies —the highest level experienced since Q2’15.
US Initial Public Offering (IPO) activity continued to make a
turnaround during the quarter, with a number of technology
companies achieving successful exits. In tandem with solid merger
and acquisition (M&A) activity, this renewal is a positive sign for the
market.
Q2 saw biotech and autotechattracting continued interest from
investors, these are expected to be hot areas of VC investment in Q3,
in addition to artificial intelligence (AI), analytics, and virtual reality
technologies. Blockchainis also expected to remain on the radar of
investors, with a growing focus on the technology’s applicability
across sectors and verticals.
In this edition of the Venture Pulse Report, we look at these and other
global and regional trends, including:
—The pickup in mega-deals activity across the globe
—The ongoing decline in number of deals, specifically at the seed
and early-stage deal levels
—The drivers behind advancements in autotech
—The growing focus on business to business (B2B) opportunities.
We hope you find this edition of the Venture Pulse Report insightful. If
you would like to discuss any of the results in more detail, please
contact a KPMG adviser in your area.
servicesandisaSwissentitywithwhichtheindependentmemberfirmsoftheKPMGnetworkareaffiliated.
Jonathan Lavender
Global Chairman,
KPMG Enterprise,
KPMG International
Brian Hughes
Co-Leader,
KPMG Enterprise
Innovative Startups
Network, KPMG
International, and Partner,
KPMG in the US
Arik Speier
Co-Leader,
KPMG Enterprise
Innovative Startups
Network, KPMG
International,and Partner,
KPMG in Israel
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Americas
31
44
US
65
Europe
88
Asia
—VC invested surges while deal volume continues decline
—Median deal sizes grow especially Series D and beyond
—Downward pressure on early rounds remains
—Mega-deal rounds return particularly in Asia
—Continued interest in biotech and autotech
—VC investment value bounces back, volume remains steady
—Series D+ median valuation hits $250 million
—US investment strong but Canada and Latin America struggle
—US VC invested reaches 2ndhighest total since 2010
—First time financings remain stable
—M&A dominates exits but IPO’s perk up
—Richly valued late-stagers go public
—VC deal value stable, volume down
—early-stage deals continue decline
—Corporate VC participation above 20 percent
—Improbable raise of $500 million one of largest in Europe —ever
—Deal value spikes to 3rdhighest level of decade
—Mid and late-stage deals gain traction
—Corporate VC surges to new high of 22.5 percent
—Mega-rounds return with a bang
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Completed transaction volume continues a gentle slide as VC invested comes roaring back
Worldwide VC deal count slid again by just over 7% between Q1 and Q2'17. However, thanks to a
surge of mega-rounds, the quarter-over-quarter increase in total venture capital invested was a
staggering 55.3%. This included the largest venture round ever, raised by Beijing-based ridesharing
platform DidiChuxing, at $5.5 billion. Analyzing year-over-year figures, even the massive $40 billion
invested in Q2'17 was down by 14.2% relative to the $46.7 billion invested in Q2 2016, while deal
volume fell by 24% across the same timeframe.
Activity across the Americas varies
Buoyed by the US, the Americas have seen deal volume hold relatively steady over the past three
quarters now, as additional datasets have been tabulated. There was a bare increase of 0.1% in
activity between Q1 2017 and Q2'17, even as total VC invested surged by close to 38%. Year over
year, however, both VC invested and volume were down, the former by 4.2% and the latter by 10.5%.
Even in nations experiencing consistent declines in venture volume, certain companies can rake in
heftily sized rounds, such as Brazil-based 99Taxis, which closed out a $200 million funding with
SoftBank’sparticipation.
Valuations remain steadfast as volume continues at subdued plateau
Nearly every financing series still records an increase in median size relative to 2016 in the US. This
continued robustness speaks to how the VC slowdown in the most developed venture market was once
again confined largely to the angel and/or seed stages in the US, which are now holding steady in
terms of finalized transactional volume. Likely driven by industry cyclicality, there could be a temporary
plateau of sorts emerging when it comes to overall US investment volume, with hefty levels of dry
powder continuing to exert upward pressure on financing metrics.
The European angel & seed stage is still subsiding, however
Quarter over quarter, aggregate VC invested actually rose slightly in Europe, moving from $4 billion to
$4.1 billion, even as quarterly volume diminished by just over 44% year over year. Unlike the US,
subsiding angel and seed rounds are the primary cause for the continued slackening in the pace of
investors. But as the historically robust tallies of quarterly VC invested testify, plenty of firms are still
willing to back multiple European companies, particularly when it comes to the late-stage. A handful of
notable financings, such as London-based Improbable’s$502 million raise or Auto1 Group’s near-$400
million round, continue to help boost overall industry tallies in the continent.
After slower start, Asia sees massive boom in VC invested
It is hard to overstate just how swiftly the tide turned when it comes to aggregate VC invested in Asia.
Boosted in large part by several Beijing-based businesses’ considerable fundraises, overall capital
deployed by investors in the region soared from $5.4 billion in Q1 2017 to $12.7