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Venture Capital Deals Mark Record Quarter in Q2 2017

By ValueWalk
Venture Capital

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Asia sees largest ever venture capital deal, and accounts for almost half of deal value

The venture capital-backed deal market has recorded its largest ever quarter, as 2,062 deals were announced worth a combined $47bn. Preqin expects these figures to rise by around 5% as more information becomes available, but Q2 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. The region saw deals worth a total $22bn announced, almost half the global total. This is 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.

Venture Capital Deals

Key Q2 Venture Capital Deals and Exits 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, the fourth time in six quarters that Asia has recorded the highest deal value of any region.
  • Despite record activity, capital available to venture capital fund managers has risen in H1 2017 to a record $176bn.
  • Angel stage investments accounted for 28% of total deal flow, while series A deals represented an equal proportion.
  • The average value of series A-C deals in 2017 YTD has fallen from levels seen in 2016. However, average series D deal size has hit a record $99bn.
  • Deals in software account for the greatest proportion of deal volume (31%), but 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 venture capital-backed deal ever recorded.
  • By contrast, exit activity faltered in Q2: just 244 exits were recorded globally, worth a combined $14bn. This is down from 293 exits which were 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.

Venture Capital Deals

Felice Egidio, Head of Venture Capital Products:

“The second quarter of 2017 has seen a record amount of capital deployed into venture capital-backed deals. This is particularly notable following the slowdown we saw in the second half of 2016, and reflects the changing nature of the global venture capital landscape. 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. While the number of financings does not yet approach North America, the region has now come into its own as an epicentre of the industry.

Venture Capital Deals

However, the exit market for venture capital-backed companies does not seem to be enjoying the same level of success. With an increasing number of companies 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. However, venture capital funds, unlike private companies, have defined lifespans after which 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.”

Article by Preqin

This article was originally published in ValueWalk.

Photo: Nicolas Lannuzel

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