Due to Mega Financing and Rise of Non-Traditional Investors
Venture capital (VC)-backed companies raised more than $32 billion globally in Q2 2015 across over 1,800 deals, bringing the total raised by VC-backed companies globally to $59.8 billion for the first half of 2015, according to a new report from KPMG and CB Insights (PDF, 1.89MB). The surge in funding in Q2 represents a 49 percent increase over the first two quarters of 2014. During the first quarter of 2015, €120 million was deployed by VCs in Ireland, a significant amount given its market size.
In Europe, funding rose dramatically during the first half of 2015, with European venture capital investment reaching $6.6 billion. The second quarter also saw a significant rise in late-stage mega-deals, with the average deal size increasing from $26.3 million in Q1 2015 to $52.2 million in Q2 2015.
Commenting on the results, Anna Scally, tax Partner at KPMG in Ireland, said: ‘Venture capital investment is thriving around the world and Ireland is punching well above its weight. A number of factors are driving this activity, including numerous disruptive technologies and applications which are spurring interest and investment from the VC community.’
Large deals are playing a major role in driving funding trends driven primarily by late-stage deals whose sizes are soaring worldwide. $100 million plus mega-round financings to VC backed companies are also on the rise. In the first two quarters of 2015, there were more than 100 mega-rounds, including 61 in Q2 that cumulatively raised more than $16 billion in investment.
‘Low interest rates combined with increasing participation by hedge funds, mutual funds and venture capital arms of large corporations means there is a tremendous availability of capital,’ explained Brian Hughes, Partner with KPMG Venture Capital Practice in the US.
Corporates participated in 22% of European deals to VC backed financings during Q2 2015, an increase over Q1 2015 where participation was just 17%. Overall we continue to see strong participation by VC arms of large corporations, who are investing in technology companies with the aim of expanding their own innovation and staying ahead of the curve.
Over the past year, there has been greater effort in Europe to foster ecosystems that create the conditions for technology companies to thrive. ‘Many of these communities are working to duplicate the model they have seen on the west coast of the US, including in Ireland and in particular, in Dublin,’ adds Anna Scally.
Valuations of technology companies in Europe are on the rise, however they remain considerably lower than valuations of companies in the US and Asia. However, the lower valuations have had a positive outcome: companies are becoming increasingly attractive to foreign investors. US VC firms in particular are becoming more active players in the European VC market. The success of some of these US VC firms has created a ripple effect, encouraging other foreign VC firms to consider making their own investments.
Regionally, North America, unsurprisingly, continues to lead global venture capital activity. With $37.5 billion invested in the first half of the year, funding is on pace to surpass 2014’s high by more than 25 percent. In Asia, a mix of traditional venture capital sources mixed with hedge funds, private equity and corporates led to $15 billion invested into VC-backed companies in the first two quarters of 2015, putting Asia on track for 45 percent growth year-over-year.
Q2-2015 was a banner quarter for ‘Unicorns’ – venture capital backed companies with valuations in excess of $1 billion. Q2 saw the number of new Unicorns more than double to 24 over Q1’s 11 new Unicorns. This included 12 new Unicorns in the United States and nine in Asia. Among the quarter’s new Unicorns were Zenefits, Oscar Health Insurance and MarkLogic.
Globally, corporate investors continue to play a prominent role in having participated in almost 25 percent of total deals in the past four quarters. In Asia, corporate investors participated in 32 percent of financing deals to Asian VC-backed companies during Q2-2015. North America and Europe also saw meaningful contributions from corporate investors with 23 percent and 22 percent of VC-backed company financings, respectively, involving corporates.
*Note: all figures cited are in USD
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