The venture capital-backed deal market set a record in the second quarter, with 2,062 announced deals worth a combined $47 billion, alternatives data provider Preqin reported this week.
The report said the figures were likely to rise by about 5% as more information becomes available, but the second quarter has surpassed the previous record of $43 billion in venture capital-backed deals set in the third quarter of 2015.
Record levels of dealmaking in Asia drove activity in the April-to-June period: 550 deals worth a total of $22 billion. The $5.5 billion financing of Didi Chuxing, a Chinese ride-sharing company, in April was the largest venture capital-backed deal ever recorded, according to the report.
The North American market recorded 936 deals worth $19 billion in the second quarter.
Felice Egidio, Preqin’s head of venture capital products, said the record-setting second quarter was particularly notable following the slowdown in the second half of 2016, and reflected 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,” Egidio said in a statement.
“While the number of financings does not yet approach North America, the region has now come into its own as an epicenter of the industry.”
In April, Preqin reported a pickup in global venture capital-backed deal activity in the first quarter.
Deals and Exits
Angel stage investments accounted for 28% of total deal flow in the second quarter, while series A deals represented an equal proportion.
The average value of series A-C deals in the first half fell from 2016 levels. However, average series D (round four and later) deal size hit a record $99 billion.
Deals in software accounted for 31% of deal volume, followed by internet at 20% and healthcare at 14%, while telecoms deals represented the largest share of total deal value, 25%.
Preqin noted that despite robust activity, capital available to venture capital fund managers rose to a record $176 billion in the first half of the year.
Exit activity contrasted sharply with deal making in the second quarter, with just 244 exits recorded globally worth a combined $14 billion. This was down from $18 billion recorded for 293 exits in the first quarter.
Trade sales account for 62% of exit volume and 73% of value.
Thirty-three venture capital-backed IPOs were announced in the quarter, worth 30% of overall exit value.
The largest announced exit was the $3.4 billion sale of Chewy, an online retailer of pet food and other pet-related products, to PetSmart in April.
“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,” Egidio said.
“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.”