Global venture capital (VC) deal value increased by 55.3 percent quarter-over-quarter to $40.1 billion in Q2’17, propelled by an uptick in mega-deals around the world, according to Venture Pulse Q2 2017, a quarterly global VC trends report published by KMPG.
While the US accounted for $21.8 billion of the total global VC investments in the quarter, Asia came in second with $12.7 billion, followed by Europe with $4.1 billion. Mega-deals such as ride hailing platform Didi Chuxing’s $5.5 billion funding round – the world’s largest tech fund raise – as well as a $1 billion Series D round to Chinese news aggregator Toutiao led the increase in total capital invested. In the US too, mega deals made a comeback with both Lyft and Outcome Health raising $600 million rounds, and several others attracting $100+ million rounds. Europe also saw one of its largest funding rounds with virtual reality startup Improbable's $502 million Series B raise. Closer home in India, OYO Rooms raised $250 million.
While global deal value soared, deal volume slid by just over 7% between Q1 and Q2'17. In fact, the total number of deals registered a fall for the fifth straight quarter, with early stage rounds being most affected. Despite the decline in transaction volume, the global median deal sizes remained buoyant, with later stage deals (Series D+) jumping from $175 million in 2016 to $260 million in H1’2017.
“With two massive deals in China, significant mega-rounds in the Americas and Europe, and the birth of numerous new unicorns – VC investment rebounded globally this quarter. While global deal volume may have declined, there are many positive signs that the VC market has reached a positive turning point,” noted Jonathan Lavender, global chairman, KPMG Enterprise, KPMG International. VC investment in Asia hits $12.7 billion
In Asia, VC investment recorded a 130 percent increase from $5.6 billion across 258 deals in Q1 to $12.7 billion across 315 deals in Q2’17. The $1 billion+ mega-fund raises by Didi Chuxing and Toutiau, as well as a significant number of $100 million+ rounds were responsible for this uptick.
The hottest sectors for VC investment across Asia this quarter were artificial intelligence, robotics, fintech, edtech as well as healthtech. Interest in cloud and infrastructure services is also picking up speed, said the report. While early stage deals saw slight increases in median deal sizes, Series D+ median deal size jumped from $59 million in 2016 to $100 million in H1’2017. Deals in India
In India, VC activity remained “robust” closing in on $870 million in the quarter, with deep tech solutions in particular, attracting investor interest. Moreover, a number of late-stage startups looked to snap up early-stage companies as a way to quickly plug gaps in their portfolios. “Most large companies are considering acquiring early-stage startups that are category leaders, these are both ecommerce players as well as traditional companies. They are looking to shorten their own product development cycles through acquisitions or trying to dominate the ecosystem by acquiring companies that enable their business.
Consolidation is now on every board’s agenda,” said Sreedhar Prasad, partner, internet business and startups, KPMG India.
From an exit perspective, India is poised to see a couple of IPOs in the tech space early in Q3. Funding too has become more readily available, with some startup founders in India becoming angel investors themselves, noted the report.