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Venture Capital-Backed Companies Raked in $32 Billion in Q2

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A new report from KPMG International and CB Insights finds venture capital investment robust around the world.

VC-backed companies raised some $32 billion in the second quarter across 1,819 deals, bringing the first-half total raised globally to $59.8 billion, a 49% increase over the same period in 2014.

Funding this year is now on track to surpass the $88 billion invested in VC-backed companies last year.

Large deals are driving funding trends, mainly late-stage ones whose sizes are soaring worldwide, the report said. 

Mega-round financings of $100 million and more to VC-backed companies are also on the rise. In the first half, upward of 100 mega-rounds cumulatively raised more than $16 billion in investment.

“Low interest rates combined with increasing participation by hedge funds, mutual funds and venture capital arms of large corporations means there is a tremendous availability of capital,” Brian Hughes, national co-lead partner in KPMG’s venture capital practice in the U.S., said in a statement.

The report noted that disruptive technologies and applications were also exciting interest and investment from VC funders.

As well, the continuing growth of on-demand platforms is expanding into new verticals in North America and beyond.

“Increasingly, VC-backed companies are staying private longer, and the best companies have a menagerie of funding options,” CB Insights’ chief executive Anand Sanwal said in the statement.

Sanwal said this helped buoy the second quarter globally. “While the funding environment is certainly frothy, we are seeing startups rapidly reshape markets ranging from transportation to hospitality to health care.”

Globally, corporate investors continued to be a strong presence, having participated in about a quarter of total deals in the past four quarters. 

In Asia, corporate investors participated in 32% of financing deals to Asian VC-backed companies during the second quarter, while North American and European corporates accounted for 23% and 22%, respectively, of VC-backed company financings.

Regional Activity

North America continued to lead global venture capital activity, with $37.5 billion invested in the first half of the year. 

Six mega-deals in the second quarter, each $275 million or more, accounted for a fifth of all North American funding, including a $1.5 billion growth equity round for AirBnB. In addition, four exits were larger than $1 billion.

And 24 billion-dollar companies—so-called Unicorns—emerged, compared with nine in the 2014 second quarter.

U.S. deal count so far this year is tracking slower than in 2014. In the first half, 2,231 deals amounted to less than half of last year’s total.

In Asia, traditional venture capital sources mixed with hedge funds, private equity and corporates led to $15 billion invested into VC-backed companies in the January-to-June period, putting Asia on track for 45% year-over-year growth. Mega-rounds into companies such as Flipkart, Coupang and Dianping are driving the funding trends, the report said.

India experienced a big rise in VC-focused deal volume, increasing from 84 deals in the first quarter to 122 deals in the second, with funding doubling over this period.

Asian internet and mobile startups took a combined 82% of funding during the second quarter, compared with 65% and 74% in North America and Europe.

VC activity also spiked in Europe during the first half, with $6.6 billion invested. This put Europe on pace to surpass 2014 totals by nearly 60%.

About a third of all European funding and deals benefited U.K. companies, including $150 million Series E investment for Funding Circle.

Interestingly, late-stage deals in the region surged in Q2 reaching an average of $51.9 million.

— Check out Exchange-Traded Assets Edge Past Hedge Fund Assets in Q2 on ThinkAdvisor.