In a clear sign that the venture capital (VC) market is becoming more pragmatic, VC investors are scrutinizing deals and cautiously betting big on fewer promising companies, says GlobalData, a leading and data analytics company.
The top 10 global VC investors participated in around 1,000 funding rounds in 2018 as compared to an average of 880 funding rounds during 2014-2017. However, not all the top 10 VC investors witnessed an increase in investment volume in 2018 as compared to their average investment volume during 2014-2017.
Of the top 10 VC investors, six (Sequoia Capital, IDG Capital, Matrix Partners, Lightspeed Management Company, Andreessen Horowitz and Zhen Fund) increased their investment volume in 2018 as compared to the average number of investments they made during 2014-2017, while the remaining four (Y Combinator, New Enterprise Associates, Accel and GV Management Co) witnessed a drop in the number of investments in 2018 as compared to their average number of investments during 2014-2017.
Interestingly, despite drop in investment volume for some of the top 10 VC investors, proportionate investment value increased for all the top 10 VC investors in 2018 as compared to the average proportionate investment value during 2014-2017.
Aurojyoti Bose, Financial Deals Analyst at GlobalData, says, “Increase in investment value despite a drop in investment volume is indicative of evolving cautiousness of VC investors, wherein they prefer placing bigger bets in fewer but promising companies.”
For instance, VC firm New Enterprise Associates registered growth in investment value despite decline in investment volume in 2018 as compared with 2014-2017 average on the back of participation in several US$100m+ funding rounds. Some of the such notable funding rounds with New Enterprise Associates’ participation in 2018 included US$350m funding in Zuoyebang and US$325m funding in Open Door Labs.
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Of the top 10 VC investors, Sequoia Capital registered the highest investment volume and value in 2018. It also featured on the top in terms of average investment volume and average proportionate investment value during 2014-2017.
Sequoia Capital also joined as one of the investors in the US$14bn fundraising by China-based Ant Financial in June 2018, which is also believed to be the single largest fundraising ever by a private company so far.
Lightspeed Management Company registered the highest growth in proportionate investment value in 2018 as compared to the 2014-2017 average.
Zhen Fund registered the highest growth in volume in 2018 as compared to the 2014-2017 average.