Over $1.8 billion invested across 185 deals in Q3 2017. Mega deals lead the way with several $100 million+ transactions
Despite the uncertainty surrounding the ongoing Brexit negotiations, investors remained committed to the potential of UK companies investing over $1.8 billion over the last quarter according to KPMG Enterprise’s latest Venture Pulse Survey.
The quarterly report on global venture capital investment, found that a total of 185 deals were done in Q3 2017 across a wide range of industries, including several $100 million+ mega-rounds such as Deliveroo ($385 million) and Prodigy Finance ($240 million).
While deal volume in the UK declined from 189 in Q2 and 258 in Q1’17, several large financings boosted the UK to a stellar quarterly investment total. The top four European deals during Q3’17 combined to produce a total of more than $900 million – with $385 million to Deliveroo, $240 million to Prodigy Finance, $169.5 million to Sound Cloud, and $165 million to Tricentis.
A sector of particular interest to investors over the quarter was Regtech (the use of new technology to facilitate the delivery of regulatory requirements), a trend that is expected to continue for some time, fueled by upcoming changes to the regulatory landscape such as MiFIDII, PSD2 and GDPR.
More broadly, the fintech and insurtech sectors are also expected to continue to draw strong investment over the months ahead as banking and insurance industries seek to deploy new technology solutions and modernise legacy systems.
However, while the UK remains a hotbed for innovation in Europe at present, the report raises some concerns related to the long-term ramifications of Brexit – particularly the impact on European talent living and working in the UK.
Commenting on the research Sonia Chiu from KPMG’s High Growth Technology practice said:
“The quality of UK businesses and their management teams continues to shine through, with the UK accounting for 40 percent of the $4.5 billion dollars in fundraising that flowed into Europe in Q3’17. There is a tremendous amount of ‘dry powder’ out there as investors continue to sit tight and wait for the right opportunity. And when they do invest, we are also starting to see more investors insisting on a defined strategy for growth.
“However, with Brexit negotiations seemingly moving towards a ‘harder exit’, questions are being raised about the impact on European nationals living and working in the UK and how this will in turn affect the attractiveness of UK businesses to overseas investors. Meanwhile, countries like Germany and France are vying to attract funding away from the UK to their own startups hubs – so it will be interesting to see how successful they are as the direction of the Brexit negotiations becomes clearer.”
Looking at the Global picture
Total venture capital investment globally reached US$39 billion in Q3’17, the fourth highest quarterly total capital invested since 2010. While total investment remains strong, the total number of deals dropped yet again, reaching levels not seen since 2011 as investors around the world continued down a disciplined path of investing, placing fewer bets on angel and seed round opportunities, and deploying higher amounts of capital to a more select group of companies.
The US continues to dominate VC investment, accounting for $21.5 billion, followed by Asia ($12.3 billion) and Europe ($4.7 billion). A majority of the investments continued to fund mega-deals during the third quarter, including US-based WeWork ($3 billion), and China-based Toutiao ($2 billion) and BAIC BJEV ($1.6 billion). The top 10 deals globally together accounted for $9.86 billion in funding. China accounted for half of the biggest deals globally. Although European deal value rose by 9.2 percent quarter over quarter and included four $100 million+ mega-rounds during Q3’17, only one Europe-based deal made the global top 10 list this quarter.
Key Q3’17 highlights
• Overall global VC investment remains strong at $39.4 billion in Q2’17, with a number of mega-deals making up the top 10 list this quarter.
• Global median deal size at every stage remains high. Median Series D+ deal pre-money valuation surged to $260 million in 2017 to date.
• Corporate venture capital investment as a percentage of deal count remained high at 17.7 percent and is expected to stay strong through Q4’17 into 2018.
• Global first-time venture financings were well off last year’s pace, declining from 5,142 deals and $17 billion in funds in 2016 to 2,736 deals and $9.7 billion so far in 2017.
• Funding for the VR/AR sector has already surpassed 2016 totals ($1.56 billion) in the first three quarters of 2017, which saw $1.645 billion dollars in VC investment. This investment category is on track to explode in 2018.
About Venture Pulse
The Q3 2017 edition of the Venture Pulse report produced by KPMG Enterprise’s Global Network for Innovative Startup, analyzes the latest global trends in venture capital investment data and provides insights from both a global and regional perspective. KPMG Enterprise has expanded the scope of Venture Pulse; this edition of the quarterly series provides in-depth analysis on the lifecycle of venture capital investments across the Americas, EMA and ASPAC, including a look at investment activity such as valuations, financing, deal sizes, mergers & acquisitions, exits, corporate investment and industry highlights.
*Note: all figures cited are in USD; data for the report provided by PitchBook.
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