Venture capital floods into late stage deals in Q1

Venture capitalists poured capital into late-stage transactions at an extraordinary pace in the first quarter, with 17 unicorn deals alone absorbing $7.2 billion, according to a just-released study.

The quarterly report from PitchBook and the National Venture Capital Association found U.S. venture investors steered $16.7 billion into late-stage transactions in the first three months of 2018, or 59 percent of capital deployed. It was the most in at least 12 years.

The capital backed 420 deals, or 10 percent fewer than the same quarter a year ago, so the average deal size went up a substantial 43 percent from last year to $41.6 million, according to the quarterly report.

The new report supports what VCJ reported last week, that first quarter venture activity overall climbed to near record levels. VCI found that U.S.-based VCs pumped $28.2 billion into 1,683 portfolio company deals, which was up in dollars but down in the number of companies funded.

VCJ reported last week that VCs signed off on $21.1 billion in investments, which was close to an 18-year record, based on preliminary data from Thomson Reuters. Only once since the end of the dot-com boom were quarterly investments higher, and then, in the second quarter of 2015, only slightly.

The PitchBook-NVCA study also reported that the exit market for venture-backed companies remained sluggish in the first quarter, with just 188 reported deals, down 19 percent from a year ago. Disclosed value was $8.1 billion, also down sharply.

The quarter witnessed 144 venture-backed M&A transactions, the largest of which was Amazon’s $1.2 billion acquisition of Ring. Fifteen venture-backed IPOs took place, with Dropbox‘s debut perhaps attracting the most attention.

In terms of financings, the quarter saw 113 deals over $50 million, the first time since 2006 the number exceeded 100. Unicorns by themselves raised 18 percent of total capital.

The late round activity suggests venture investors hold out hope for improving exit market activity in coming quarters.

Photo of money bags courtesy of jwblinn/iStock/Getty Images.