Key Takeaways
- • US venture capital deployed nearly $131 billion across 8,949 deals in 2018, an all-time high surpassing the previous record of $105 billion set in 2000, with $75.7 billion in dry powder available for future deployment.
- • Mega-deals of $50 million or more drove the record total, increasing 91.3% over 2017 and demonstrating a market shift toward larger check sizes despite a slight decline in overall deal count since 2014–2015 peak years.
- • The National Venture Capital Association reported 85 venture-backed IPOs (the most since 2014), $7.5 billion in angel and seed investments, and 1,308 biotech and pharmaceutical investments valued at $23.3 billion—both record highs in those categories.
- • Venture-backed exits (acquisitions and IPOs combined) reached $120 billion across 864 transactions, with IPOs returning greater than 50% of exit value for the second consecutive year.
- • VC funds raised $55.5 billion in new capital across 256 vehicles in 2018, a record fundraising total, while software remained the dominant sector at 38.5% of investments, and biotech/health care emerged as the fastest-growing category.
Summary
The US venture capital market set multiple all-time records in 2018, with investors deploying $130.9 billion across the startup ecosystem—the first time annual investment surpassed the $100 billion threshold since the dot-com era peak in 2000. According to the PitchBook-NVCA Venture Monitor, this represents a watershed moment for venture capital maturation, though it has prompted comparisons to the valuations of 2000 and raised questions about market sustainability.
The composition of 2018 dealmaking shifted markedly toward larger transactions. Mega-deals—defined as investments of $50 million or more—increased by 91.3% compared to 2017, significantly boosting aggregate capital deployment despite a slight contraction in total deal count relative to 2014–2015 peak years. This trend reflects the venture market's evolution toward funding later-stage, more mature companies alongside traditional early-stage activity. Angel and seed investments in very early-stage companies totaled $7.5 billion, underscoring continued investor appetite across the funding spectrum.
Exit activity demonstrated robust market health in 2018. Venture-backed exits generated $120 billion in aggregate value across 864 transactions, driven by 85 IPOs—the highest count since 2014—alongside acquisition activity. IPOs accounted for greater than 50% of total exit value for the second consecutive year, signaling renewed confidence in public markets for venture-backed companies. VC fundraising also reached historic levels, with venture capital funds raising $55.5 billion across 256 vehicles, enabling sustained capital deployment into the ecosystem.
Sector concentration continued to favor software, which represented 38.5% of venture investments, though biotech and pharmaceutical investments achieved dual records: 1,308 deals valued at $23.3 billion. Health care services, medical devices, and IT hardware rounded out the top categories, with "other" segments emerging as the fastest-growing classification. The broader venture ecosystem benefited from $75.7 billion in available dry powder, positioning investors for continued dealmaking.
Market observers note that while 2018's valuations invite historical comparison to 2000, fundamental differences exist: companies in the 2018 ecosystem demonstrate stronger financial health, and overall equity market valuations remain more rational than during the dot-com bubble. Nevertheless, venture markets remain cyclical, and recent equity market volatility introduces uncertainty regarding sustainability. The National Venture Capital Association's data underscores that the US venture ecosystem has become broader, deeper, and more diverse than in prior cycles, though the inevitable downturn's timing remains uncertain.
The composition of 2018 dealmaking shifted markedly toward larger transactions. Mega-deals—defined as investments of $50 million or more—increased by 91.3% compared to 2017, significantly boosting aggregate capital deployment despite a slight contraction in total deal count relative to 2014–2015 peak years. This trend reflects the venture market's evolution toward funding later-stage, more mature companies alongside traditional early-stage activity. Angel and seed investments in very early-stage companies totaled $7.5 billion, underscoring continued investor appetite across the funding spectrum.
Exit activity demonstrated robust market health in 2018. Venture-backed exits generated $120 billion in aggregate value across 864 transactions, driven by 85 IPOs—the highest count since 2014—alongside acquisition activity. IPOs accounted for greater than 50% of total exit value for the second consecutive year, signaling renewed confidence in public markets for venture-backed companies. VC fundraising also reached historic levels, with venture capital funds raising $55.5 billion across 256 vehicles, enabling sustained capital deployment into the ecosystem.
Sector concentration continued to favor software, which represented 38.5% of venture investments, though biotech and pharmaceutical investments achieved dual records: 1,308 deals valued at $23.3 billion. Health care services, medical devices, and IT hardware rounded out the top categories, with "other" segments emerging as the fastest-growing classification. The broader venture ecosystem benefited from $75.7 billion in available dry powder, positioning investors for continued dealmaking.
Market observers note that while 2018's valuations invite historical comparison to 2000, fundamental differences exist: companies in the 2018 ecosystem demonstrate stronger financial health, and overall equity market valuations remain more rational than during the dot-com bubble. Nevertheless, venture markets remain cyclical, and recent equity market volatility introduces uncertainty regarding sustainability. The National Venture Capital Association's data underscores that the US venture ecosystem has become broader, deeper, and more diverse than in prior cycles, though the inevitable downturn's timing remains uncertain.
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