UPDATED 00:01 EST / JULY 12 2018

sandhillroad EMERGING TECH

Boom times: Venture capital funding hits record highs as AI leads the way

Venture capital flowing into technology companies continued at record highs in the second quarter as two reports said the U.S. tech market is at highs it hasn’t seen since the dot-com bubble of the late 1990s.

The numbers come from both the 2018 PitchBook-NVCA Venture Monitor and the PwC/CBInsights MoneyTree Report. Though varying slightly on numbers, both agree we’re in the middle of another venture capital boom.

According to PitchBook-NVCA, $57.5 billion in venture capital was invested in U.S. companies for the year through to the end of the second quarter, higher than six of the past 10 full-year totals and on pace to surpass $100 billion in deal values for the first time since the dot-com era. For the second quarter, MoneyTree puts the figure $23 billion across 1,416, up 2 percent over the first quarter with the number of deals up 9 percent.

The MoneyTree report said U.S. megarounds set records, with 45 rounds of $100 million or more. But those rounds declined as a percentage of total VC funding to 34 percent, the second straight quarterly decline from a high of 39 percent in the fourth quarter of 2017.

Much of the money flowing into tech companies is being driven by a high level of commitments to new VC funds. PitchBook-NVCA’s report noted that not including Sequoia’s $6 billion close on its record-breaking fund in June, 2018 has already seen $20.2 billion in commitments received for new VC vehicles.

Six U.S. companies became unicorns — companies with a valuation in $1 billion or more — in the quarter. Eleven companies with unicorn valuations exited, meaning they were acquired or went public, with $29 billion in exit value so far in 2018.

First venture financings as a share of all U.S. deals also rose to 35 percent of the total in the second quarter, up from 33 percent in the first quarter as venture capital funds increasingly look to invest in newer companies.

Leading the surge in VC investment was artificial intelligence. MoneyTree described the sector as having a “big quarter,” with funding for U.S. AI companies coming in at $2.3 billion, up 37 percent over the first quarter. Leading the AI pack were a $392 million round in Dataminr Inc. and $200 million into CrowdStrike Inc., both in June.

Alongside AI, financial techology investments continued to surge, coming in at $3 billion over 142 deals, up 40 percent jump over the previous quarter.

Globally, both deals and dollars invested hit new records. According to MoneyTree, deal activity rose by 17 percent to a record 3,564 deals, and funding increased 6 percent, to $51 billion. Asia led back with 40 $100 million-plus deals, up from 29 in the first quarter, with the region also seeing the creation of nine new unicorns and a 36 percent increase in deal activity.

“Global deal activity remained strong with venture investment into Asian companies being particularly robust (funding grew 10 percent from Q1 to Q2),” said Anand Sanwal, co-founder and chief executive of CB Insights. “Asia is seeing lots of local and cross border investment and we expect this continue.”

What’s more, he added, the growth in megadeals highlights the “immense amounts of capital that is pouring into the private company market.”

Full copies of the reports can be found at CBInsights and Pitchbook.

Picture: Steven Damron/Wikimedia Commons

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