Innovation Banking Industry News

Our Innovation Banking team, the senior team members of which have a combined over 40 years of industry experience, are active members of the technology entrepreneur and investor communities across the country. As such we are able to keep our fingers on the pulse of the industry, closely monitoring valuation trends, emerging technologies, and investor appetites.

Venture Capital Investment in Q3 2017


 

$21.5 billion invested in Q3 2017 over 1,706 deals

  • Q3 2017 was the 15th consecutive quarter with $10 billion or more invested, up 40% from Q3 2016 but down 6.3% from Q2 2017.
     

The number of deals closed in Q3 2017 declined 17.6% YoY (year over year), however, the amount of capital per deal continues to increase

  • This is a product of the enormous equity rounds that have become the new normal, for example, $4 billion was invested in WeWork in Q3 2017 and $1 billion in Airbnb in Q2 2017. 
    • Unicorn private rounds have extended the traditional return timelines; the average time to exit has grown to 6.2 years, with the median exceeding 5 years for the first time in the past decade.
    • This trend is likely to continue near-term as U.S. venture capitalists have more dry powder ($92 billion) than any time in the past decade, and many mega-funds remain within their investment periods.

 

 

Bar graph of US venture capital investment by quarter as of September 30, 2017

Venture Capital Investment in Q3 2017

Sector splits remain largely unchanged 

Software industry continues to receive the highest level of funding 

  • $23.2 billion was invested in 2,272 companies, representing approximately 38% of total invested capital as of September 30, 2017.
  • Pharma and Biotech attracted the second-highest amount of investment with $8.3 billion.
Bar graph of US venture capital activity by sector as of September 30, 2017

VC Market Update

$5.2 billion was raised across 38 funds in Q3 2017, which was down approximately 54% from Q2 2017. 

  • $5.2 billion was raised across 38 funds in Q3 2017, which was down approximately 54% from Q2 2017.
  • LPs (limited partners) remain committed to the asset class, resulting in GPs’ (general partners) median time fundraising dropping to 13 months in 2017 from 18 months in 2016.
  • Fund sizes continue to climb despite the number of funds growing; median fund sizes in 2017 are 87% larger than in 2015.
Bar graph of US venture capital fundraising activity
Line graph of median and average US venture capital fund size in millions of dollars

Q3 2017 Venture-Backed Exits

 

Q3 2017 Venture-Backed Exits Continue Slide Started in Q2 2017 

  • Only 144 exits in Q3 2017, the lowest quarterly total since 2009 
    • Only 8 VC-backed IPOs (initial public offerings) in Q3 2017
    • Average time to exit has increased to 7.4 years for a buyout, and is over 8 years for IPOs
    • Major drivers are trends of companies choosing to delay exits and not raising institutional rounds until later in their respective life cycles 
Bar graph of US venture-backed exit activity

For more information contact:

John Hoesley
Managing Director
312-564-2711

Josh Roberts
Managing Director
312-564-1813