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.

2017: Highest amount of capital invested since the dot-com era


2017 finished the year with the highest amount of venture capital investment since the dot-com era in terms of total capital invested

  • Over $84 billion across 8,076 completed financings
  • 4Q17 was the 3rd consecutive quarter with over $20 billion invested
     

The number of deals closed has been in decline since 2015, increasing the amount of capital per deal

  • Product of the enormous equity rounds that have become the new normal (WeWork – $4 billion in 3Q17 and Airbnb – $1 billion in 2Q17)
  • Median deal size has grown across all stages
Bar graph of US venture capital investment by year as of December 31, 2017

Venture capital market update – early stage investment spikes in 4Q17

4Q17 saw more than $10 billion of early stage investment — the first time this has ever happened

  • 40% increase quarter over quarter and approximately 106% year over year


Driven by the record amounts of dry powder, increasing median deal size, and startups continuing to wait longer before pursuing a Series A 

  • Early stage median deal size has doubled since 2013
  • Median age of companies raising an institutional seed or Series A has grown to over 3.5 years
Bar graph of US venture capital early stage investment by quarter as of December 31, 2017.

Venture capital market update – 2017 fundraising declines, but fund sizes increasing


$32 billion was raised across 209 funds in 2017, which was down approximately 20% from 2016, noting 2016 was a record year for fundraising

  • $143 billion raised since 2014; ample dry powder
  • Median fund size continues to increase rising to $60 million in 2017 relative to $50 million in 2016, and $32 million in 2015
    • Buoyed by some outsized raises such as NEA ($3.3 billion) and Mithril Capital ($850 million)
  • First time fund managers continue to garner interest from limited partners across all stages
    • $3.3 billion raised by first time managers in 2017 across 35 funds, an improvement of 47% and 40% respectively over the prior year
Bar graph showing US venture capital fundraising by year as of December 31, 2017
Bar graph showing US venture capital investment in first time funds by year as of December 31, 2017

Venture capital market update – venture-backed exits in 2017 continue decline

 

Only 769 exits in 2017 totaling $51 billion — the lowest annual total since 2011 

  • Despite counts moving lower, sales prices remained elevated; median exit size of $85 million representing 17% year over year growth 
    • Largest median exist size recorded in the last decade
  • Major driver is trend of companies choosing to delay exits
    • In concert with trend of companies not raising institutional rounds until later in their respective life cycles
    • The average time to exit in the venture market has increased to 5.6 years 
  • Rebound in venture backed IPOs in 2017 to 58 from 41 the prior year generating $10 billion in exit value


Private equity and non-traditional venture capitals starting to pick up the slack

  • More than $7 billion of exit value in 2017 has come from private equity buyouts, reflecting year over year growth of 200%
  • Non-traditional venture capitals, such as Softbank’s Vision Fund, have acquired a notable portion of their portfolios via the secondary market
Bar graph showing US venture capital backed exits by year as of December 31, 2017

For more information contact:

John Hoesley
Managing Director
312-564-2711

Josh Roberts
Managing Director
312-564-1813