NEW YORK – While funding to Venture-Capital backed companies in the United States during the first quarter increased 4 percent from a year ago, deal activity declined 2 percent due to 30 rounds of $100 million or more.
US-based Artificial Intelligence companies had a record quarter as funding leapt 29 percent in Q1’18. Representing an eight-quarter high in funding, $1.9 Billion was invested across 116 deals to US AI companies. The $1Billion quarter was led by companies such as UiPath ($153 Million Series B), Pony.ai ($112 Million Series A), and Nuro ($92 Million Series A).
“2018 looks to continue the trend of larger deals as we’ve now seen two consecutive quarters with over 30 rounds of $100M or more – only the second time in recent history that this has happened. Additionally, the $21B we saw invested this quarter is a record high, just the second time we’ve reached this funding level during the last 15 years,” said Tom Ciccolella, Pricewaterhousecoopers’ US Venture Capital Leader, “and Artificial Intelligence saw its biggest funding quarter ever (more than $1.8 Billion).”
Q1’18 saw 34 mega-rounds to US VC-backed companies, which accounted for 34 percent of total funding, but down from 42 percent in Q4’17. This marks the first decline since Q4’16.
Several US regions also saw an increase in funding. San Francisco-based companies saw a 23 percent increase in funding, spurred by 8 mega-rounds of $100M or more. LA/Orange County saw funding jump 97 percent with $1.9 Billion invested across 101 deals. For the third-straight quarter, New England funding increased, with $2.7 Billion invested across 125 deals.
Despite a 4 percent decline in deal activity this quarter, global investment reached $46.5 Billion across 2,884 deals. North America and Asia continue to be centers for mega-rounds and unicorns. North America saw 35 mega-rounds in Q1’18, while Asia recorded 29, and accounted for 4 of the 5 top rounds globally. Both regions were each home to five new Unicorns this quarter.
“Early stage deals declined this quarter while mega-rounds, those over $100 Million, and later stage funding remained strong. This is a trend we have seen the past few quarters,” said Anand Sanwal, co-founder and CEO of CB Insights. “Right now, a lot of the money flowing into venture-backed companies is from large corporates or sovereigns who need to put a lot of money to work at once. This diversion of attention away from early-stage venture is something worth watching as it will have knock-on effects down the line on the venture market.”
Key Q1 2018 highlights:
- The US market saw strong funding growth as dollars to VC-backed companies were up 4 percent in Q1’18 over the previous quarter with $21.1 Billion invested across 1,206 deals. Deal activity declined for the second consecutive quarter, falling 2 percent.
- As the second-consecutive quarter with over 30 rounds of $100 Million or more, Q1’18 was another big quarter for mega-rounds. The US saw 34 mega-rounds, which accounted for 34 percent of total funding this quarter, but down from 42 percent in Q4’17. This marks the first decline since Q4’16.
- North America and Asia are centers for mega-rounds and unicorns. North America saw 35 mega-rounds in Q1’18, while Asia recorded 29, and accounted for four of the five top rounds globally.
- US and Asia remain tied in unicorn creation, each minting five new unicorns in Q1’18 and up from four the previous quarter. New US-based companies achieving a valuation of $1 Billion or more included UiPath, Intercom, and DoorDash.
- First venture rounds decline as a share of all US deals fell to 32 percent in Q1’18, the lowest percentage since Q1’17. This is correlated to a pullback in VC investment at the seed stage.
- Quarterly global deal and funding activity declined, by 4 percent and 5 percent respectively, as $46.5 Billion was invested across 2,884 deals.
- Deal activity in Asia and Europe saw a slight decline. After heady Q4’17, total quarterly funding to Asia-based companies declined 17 percent in Q1’18 as $19.1Billion was invested across 912 deals. This represents a 5 percent decline in deals, down from 957 the quarter prior. While European deal activity also declined slightly, funding increased 8 percent, with $4.8 Billion was invested across 593 deals.
- New England funding overtook New York Metro, increasing for the third-straight quarter. NY Metro-based companies saw 13 percent fewer deals than last quarter, recording $2.6 Billion across 172 deals.
- San Francisco and Los Angeles funding both increased while Silicon Valley funding declined. San Francisco-based companies saw a 23 percent increase in funding, spurred by 8 mega-deals of $100 Million or more. LA/Orange County saw funding jump 97 percent with $1.9 Billion invested across 101 deals. Meanwhile, Silicon Valley (S. Bay) funding declined by 20 percent to $2.9 Billion in Q1’18, down from $3.6 Billion the quarter before.