Venture capital (VC) investments worldwide crossed the $250-billion mark in 2018 for the first time, driven by key sectors such as artificial intelligence, ride-hailing, health-tech and biotech, audit and consultancy firm KPMG said in a report.
Led by a $12.8-billion funding round to US-based e-cigarette manufacturer Juul, and $14 billion raised by China’s Ant Financial, global venture capital investments climbed from $175 billion in 2017 to $254 billion in 2018, KPMG’s Enterprise Venture Pulse report for the December quarter said. This, despite a drop in the number of deals for the third straight year, signalling investor appetite to bet larger cheques of capital on fewer startups.
The total number of VC deals fell to a six-year low of 15,299 in 2018, compared with 17,314 in 2017 and a peak of 20,172 in 2015.
“The record levels of funding we are seeing around the world highlight the intense focus venture capital investors are placing on late-stage deals. One billion plus mega-deals alone in Q418 accounted for $22 billion in investment—approximately a third of the total funding raised this quarter,” said Brian Hughes, national co-lead partner, KPMG Venture Capital Practice, and a partner with KPMG in the US.
In Asia, venture capital activity witnessed a slowdown in the fourth quarter, with fundraising falling from $17.6 billion in Q3 to a seven-quarter low of $15 billion in Q4.
Despite the decline, the region saw four deals of over a billion dollars each, comprising China-based content startup ByteDance ($3 billion), Singapore-based ride-hailing app Grab ($2.85 billion), Indonesian e-commerce site Tokopedia ($1.1 billion), and Indian food delivery startup Swiggy ($1 billion).
According to the report, deal sizes in India grew considerably, pointing to increasing maturity in the Indian venture capital market.
Fintech continued to be a big bet for VC investors in India throughout the year, in addition to marketplace platforms and ride-hailing. There will also likely be an increase in a number of niche innovation areas, such as digital platforms to facilitate used car sales, it added.
Nitish Poddar, partner and national leader for private equity at KPMG in India said: “India is the fastest growing large economy in the world, so anything with a consumer story is very attractive to investors today. We’re seeing a lot of action in consumer solutions in addition to industrial, automotive and healthcare (sectors). The outlook is very positive heading into 2019″.
Going forward, given a strong year for VC investments in the US, Asia and Europe, KPMG said 2019 may not match the same level of investment activity.
However, it expects substantial venture capital investments to continue globally, particularly in late-stage deals.
Autotech—autonomous vehicles, alternative energy vehicles, or ride hailing services —is expected to see strong investment, in addition to healthtech and fintech.
“The IPO market will be one area to watch as several massive unicorns, including Uber and Lyft, prepare for IPOs despite the unexpected turbulence in the capital markets at the end of 2018,” the report added.
Source: Mint