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Venture investing hits post dot-com record in 2017

Venture investors finished 2017 with a bang, investing $23.8 billion in the fourth quarter and pushing the year to a post dot-com record for capital deployed in the United States.

Last year saw $84.2 billion invested in 8,076 deals, a 16 percent increase in dollars from 2016 and a 6 percent decline in deals, according to the National Venture Capital Association and PitchBook. It was the smallest number of deals since 2012, largely due to a decline in angel and seed transactions.

The year’s activity was driven by an increase in deal size, particularly at the later stage. Deals of $50 million or more generated almost half of capital deployed, and unicorn companies, those with valuations of $1 billion or more, raised $19.2 billion, an annual record, the data shows.

The fourth quarter was the largest of the year, with capital deployed up 12 percent from the third quarter and 1,778 deals funded. The deal total was down 11 percent. Top transactions included a $1.5 billion round for Lyft, a $1.2 billion round for Grail and a $1 billion round for Faraday Future.

Magic Leap also raised $502 million and Compass closed on $500 million. The total did not include SoftBank’s reported $1.25 billion direct investment in Uber, which came to light in late December.

Source: NVCA and PitchBook
Source: NVCA and PitchBook

For the year, the average later-stage deal size rose to $30.6 million, up from $28.4 million in 2016, and the average early-stage deal rose to $13.1 million from $10 million, the NVCA and PitchBook said. Software companies received the largest chunk of 2017’s capital, or $30.8 billion, which was a decline, followed by pharmaceutical and biotech companies, which received $12.9 billion. The pharma and biotech total rose 56 percent.

Fundraising during the year reached $32.4 billion, with 209 fund gathering capital. This was down from $40.2 billion in 2016, but the fourth year in a row of more than $30 billion. Fourth quarter fundraising kept a slow pace with $6.7 billion raised. The NVCA-PitchBook quarterly number includes the $2 billion Rise Fund from private equity firm TPG.

Flagship Pioneering and Andreessen Horowitz also raised funds in the quarter.

Exit activity in 2017 was tempered, with 565 acquisitions of venture-backed companies, 58 IPOs and 146 buyouts, the data show. The fourth quarter saw 23 IPOs, an increase from the third quarter, and 110 acquisitions, down from the third quarter.

Top deals include the acquisitions of NeoTract for $1.1 billion and of Musical.ly for $1 billion. Top public offerings came from Razer and Switch.

Photo of fingers walking up a growing stack of hundred-dollar bills courtesy of PeopleImages/iStock/Getty Images.