Building on momentum generated in Q2, venture capital (VC) transactions in Q3 2017 continued to break records.
According to data firm Preqin, during the third quarter, the global VC the industry announced 2,362 deals worth a combined $49 billion. There were 2,512 VC-backed deals in Q2, valued at $48 billion. At the current rate, Preqin forecasts total deal activity for the full year will be $128 billion, surpassing the market’s previous annual aggregate value record.
North America saw the most transaction activity in Q3, announcing 939 deals (40%) representing an aggregate $19 billion. The majority of North American VC-backed deals in North America were in California, representing 44% of all deals. The US was followed by China, which accounted for 23% of all deals.
The largest decline in deal activity was in Israel, which saw its percentage of worldwide transactions fall to just one percent in Q3 from 34% in Q2.
The largest deal announced in Q3 was Grab Holdings at $2 billion, which included funding from investors Didi Chuxing. Didi Chuxing was also involved in the largest VC deal ever recorded, a $5.5 billion telecom financing in April.
The CNY 9.5 billion sale of China-based Mango TV to Happigo was the largest VC-backed exit announced in Q3, according to Preqin.
Transactions involving software companies accounted for 26% of all deals in Q3, the largest proportion of deals in a specific sector in the period. The largest share in terms of aggregate deal value were internet company deals, however, also at 26%.
Preqin found that series A financings accounted for 31% of VC deals in the quarter, with angel investments contributing 26% of deal flow. It also reported that later-stage deals have increased in value in the past few years. Although median A-C year-to-date (YTD) arrangements are less, series D and later funding deals have hit $98 million.
Despite large values, the year has seen transactions decline, however, with Q3 representing the sixth consecutive quarterly dip. The sector recorded 7,552 VC deals through the close of the third quarter, compared to 8,792 in the equivalent period last year.
“Driven by the rising number of late-stage multi-billion dollar financings – eight in Q3 alone – the industry is setting new records with increasing regularity. Increased opportunities in emerging markets and increased appetite from investors are combining to propel the venture capital industry to new heights,” Felice Egidio, Head of Venture Capital Products at Preqin said in a statement.
He added: “The bulk of deal activity remains focused on the earlier part of the funding cycle, with angel and series A investments accounting for almost half of total deal numbers. However, deal values are increasingly being driven by large late-stage financings and debt issuances. In fact, while the average value of financings up to series C have all fallen in 2017, average series D deals are at a record high, while the average venture debt issuance is more than twice as large as it was in 2015.”