Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Today we’re digging into the Q4 venture capital market — specifically unpacking three pieces of data that stood out as we read the Crunchbase News Q4 global report — and Pitchbook and NVCA’s comparative, U.S.-focused Q4 data dive. As always, each contains a wealth of charts and numbers, so if you have a specific question, happy hunting.
Our exercise today is to cut through the data deluge to dig up a few key facts that will give us a good grasp of where the market wound up last year. We’ll start with early-stage results, talk about the global market in aggregate and close with a unicorn-focused datum to chew on. Ready?
Early-stage plateau
According to Pitchbook and NVCA, United States-demarcated angel and seed deals dipped in 2019 but managed to set an a record in terms of funding value. In that year, 4,541 angel and seed deals were said to ring up $9.2 billion in invested capital.
That result was off from 2017’s deal total (4,921) and down even more sharply from the 5,461 angel and seed deals counted in 2014 and 5,743 deals noted in 2015. But 2018’s angel and seed dollar volume gave the year shine and any local maxima in a growing market stands out.
The same angel and seed tallies in 2019 were let-downs. Deal count came in flat at 4,556 (a tie, given the lag in counting seed and angel deals), while dollar volume slipped slightly. You can read the data in two ways: first, that 2019 managed to nigh-match 2018, a year that included a superlative, or alternately, that seed and angel deal volume remained depressed compared to cycle-highs and dollar volume fell slightly on a year-over-year basis.
Either way deal and dollar volume sat still last year; as the report says, the data points “plateaued.” In more practical terms, we can infer that it’s harder than it was a few years ago to raise a seed or angel round (due to a roughly 20% volume decline), but that if you do raise a round, it’s probably going to be of comfortable size.
A global silver medal
The Crunchbase News teams’s global report (a recurring behemoth) included the following chart that we’re quoting (it’s a Jason D. Rowley creation):
This chart marks 2019 as, yes, a let-down of sorts from the 2018 global venture results in dollar terms. But it also highlights 2019 as an incredible year for global venture investment when considered in longer historical context.
Perhaps 2018’s record projections won’t be bested in the current cycle. It’s hard to see how they could be beat in 2020, following the WeWork IPO fiasco and the now-in-doubt Vision Fund 2; without Vision Fund checks, is there enough dry powder in venture to set a new record? Regardless, the amount of capital pushed into the global venture market last year was astounding. Sure, off a bit from all-time highs, but still a staggering sum.
Founder takeaway? Raise now while there’s still so much money sloshing around.
Unicorn wobbles
Returning to the Pitchbook and NVCA report, one more bit of data: according to their calculations, U.S.-based unicorns saw their fundraising pace drop sharply in Q4 2019.
As often happens with venture data, deal and dollar volume diverged in the quarter (a few large rounds can skew dollar volume, pushing it out of sync with deal totals for any given period), but I’d hazard that deal count matters more in this case. The deal count (down sharply form Q4 2018 levels, mind) drop came after WeWork’s implosion chilled the late-stage market and the market’s rejection of unprofitable IPOs like Peloton and SmileDirectClub appeared concrete (Peloton has since largely recovered).
Are 31 unicorn deals sufficient in a quarter to not only allow for continued new unicorn birth (a quarterly certainty, even domestically) and provide enough capital to support the existing cohort of United States-based unicorns? Probably not. And as there are not too many unicorn exits happening, either through M&A or public offerings, we might have seen the start of the Unicorn Crunch in Q4 2019. We’ll need another quarter or two of data to be sure, but look at that chart.
In total then, we’re seeing the earliest-stages of the venture market sit still, albeit at partially elevated levels. The global venture market had a strong year in aggregate, but we can see some retreat in the data from record highs. And there are some unicorn warning lights flashing.
Got all that? Good. Chat tomorrow.
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