Venture capital investments in tech companies are set to surpass $100 billion for the second straight year, but they’re slowing.

That’s according to a third-quarter 2019 published by PitchBook-NVCA Venture Monitor today. Describing venture capital as still robust, the report states that “the overall climate of the VC ecosystem appears to have cooled slightly, but there remains ample capital in private markets for VCs to invest.”

The third quarter saw a drop in venture capital funding into small and early-stage startups to just under $2 billion across just over 1,000 deals. The report notes that though the numbers are down, it’s not a significant drop versus a steady deal flow that is a “healthy signal for the broader venture capital ecosystem.”

Venture capital funding figures are still skewed to late-stage funding over smaller startups. Although “first financing value stays strong,” the third quarter saw the lowest number of deals since at least the first quarter of 2014, though the amount invested was higher. That’s a reflection that early-stage funding is larger than it previously was.

Late-stage funding, that is for startups with multiple rounds, came in at $17 billion in the third quarter across 572 deals. Some 83 deals topped $80 million, accounting for nearly 70% of late-stage VC activity.

Year-to-date, more than $41 billion has been invested in late-stage startups. So-called “ultra-late-stage” rounds have become more commonplace in the industry as well, with some described as “private IPO” rounds used to delay initial public offering filings.

Although 2019 may not break overall records for venture capital funding, one standout sector this year is artificial intelligence and machine learning. It saw 191 VC rounds by the end of the third quarter, the highest level ever recorded. Fintech remains strong as well, with $12.3 billion invested in 2019 by the end of the third quarter, surpassing the $11.6 billion raised by the sector in the whole of 2018.

If direct investment into startups may have passed its peak, the report notes that exits, that is where companies with venture capital funding go public, are already in 2019 at the highest level in over a decade with a quarter still to go. “Top of mind for the industry, however, is the pricing of these high-profile IPOs and their subsequent performance after listing,” the report cautiously adds. “These recent listings will likely affect the sentiment around the next wave of companies looking to go public in and into the upcoming election year.”

Exits remained strong in the third quarter, though slightly down from what is already a record-breaking year. Exits in the quarter came in a $35.4 billion, down from the second quarter but bringing the year-to-date total to more than $200 billion.

The report didn’t deal with numbers alone, calling out the Committee on Foreign Investment in the United States for stifling foreign venture capital investment into startups. It notes that “delayed financings increasingly becoming an issue for companies.” Immigration policy was also called out, in particular Trump administration immigration policies that have made it difficult for VC-funded companies to import trained talent.

Photo: Steven Damron/Wikimedia Commons