Venture-backed firms take record $32 bn in Q2, mostly in mega-deals

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Published: July 24, 2015 12:40:56 AM

Venture capital-backed firms globally raised a record $32.5 billion in the second quarter, but this eye-watering figure disguises a disquieting fixation on mega-deals, which attracted half of all funding, resulting in fewer start-up deals.

Venture capital-backed firms globally raised a record $32.5 billion in the second quarter, but this eye-watering figure disguises a disquieting fixation on mega-deals, which attracted half of all funding, resulting in fewer start-up deals.

The quarter saw 61 mega-rounds, defined as investments of $100 million or more, taking in more than $16 billion, as wavering confidence in public markets fed the rise of private IPOs, a report out on Thursday said.

The Venture Pulse report published by KPMG and venture capital tracker CB Insights said the volume of deals in the latest quarter declined globally for the third straight period to 1,819, off 5 percent from a peak in 2014’s third quarter.

Low interest rates are driving more corporate investors, hedge funds, mutual funds and sovereign wealth authorities to seek greater rates of return from late-stage private firms instead of taking chances in public markets, the study showed.

Mega-funding rounds went to North American firms such as AirBnB, Zenefits, Uber and Wish, Asian companies Coupang, ZhongAn Insurance and Flipkart, and to a far smaller number of European firms including Spotify, OneWeb and Delivery Hero.

The average value of late-stage deals jumped 43 percent to $74.0 million from $51.8 million in the first quarter, while early-stage deals, typically for start-ups under $10 million in annual sales, rose a modest 4 percent to $4.7 million.

Late-stage deals in Asia attracted an average of $200 million, four times the level in either North America or Europe.

North America, especially Silicon Valley but also New York and Boston, continues to attract the most deals and dollars into VC-backed companies with $19 billion spread across more than 1,110 deals in the second quarter, KPMG and CB Insights said.

Asia and Europe saw about 300 deals a piece in the latest quarter. Asian firms attracted three times more funding than Europe, as Asian investment doubled to more than $10.5 billion compared to the first quarter, while Europe raised $3.2 billion, down from $3.4 billion in 2015’s first quarter.

While mega-deals in Silicon Valley have concentrated financial wherewithal in recent years, Asia is catching up: North America saw 30 mega-deals in the second quarter while Asia had 25 and European companies attracted just six mega-rounds.

With $60 billion raised in the first half of the year, if current trends hold, venture-funding globally will top $100 billion for 2015 as a whole, easily surpassing the $88 billion raised in the previous banner year 2014, the study said.

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