VC investment in the US remained strong in Q4’19, bringing a positive end to the country’s second best year of VC investment ever next to 2018. Despite the resonating impact of the WeWork debacle and some loss of confidence with respect to unicorn IPOs, there continued to be a ton of dry powder in the market which helped fuel deal-making.
VC investment in the US was robust across many different sectors and technology verticals. Fintech, food delivery, B2B services, automation and RPA: these and a number of other areas all attracted significant investments in Q4’19. Continuing a longer-term trend, food delivery continued to attract large investments, with DoorDash raising $700 million in Q4’19. Fintech also remained very hot with Chime raising $500 million during the quarter, Robinhood raising $373 million, and Next insurance raising $250 million.
The geographic diversity of VC investments in the US also continued to expand well beyond Silicon Valley in Q4’19, with companies from New York, Seattle, Portland, and Austin attracting large deals this quarter.
Heading into 2020, VC investment is expected to remain hot in areas related to fintech, artificial intelligence, and RPA. Corporate VC investment is also expected to remain robust, with a continued focus on adjacency investments in addition to other strategic investments. VC investor interest in consumer-focused companies could drop off somewhat until there is more certainty around whether the unit economics of businesses like Uber, Lyft, and food delivery companies can be profitable.
With the number of first-time venture financings continuing to drop, the US could see an uptick in venture investments by family offices. With less confidence yet still a significant amount of dry powder at their fingertips, traditional VC investors are expected to remain focused on late stage and follow-on deals.
In Q1’20, it is expected that companies – particularly unicorns - looking to issue IPOs will spend more time pre-IPO on improving their financial position, putting their operations in order, and ensuring their unit economics are attractive. Despite market challenges, IPOs could see an uptick to start the year as companies look to exit prior to the US presidential election.