Q3’19 sees global VC investment of US$55.71 billion; Europe attracts record quarterly high of US$9.79 billion.
VC investment in commercial (B2B) services reaches annual record US$16.57 billion with one quarter remaining in 2019.
The third quarter of 2019 saw US$55.71 billion of venture capital investment raised globally across 4,154 deals, according to the Q3'19 edition of Venture Pulse - a quarterly report on global VC trends published by KPMG Enterprise. While a decline from Q2'19, funding remained strong relative to historical norms.
The US continued to attract the lion's share of VC investment, with US$28.19 billion invested across 2,265 deals. VC investment in Asia, meanwhile, slipped to US$14.92 billion during Q3'19, highlighting the ongoing softness of the Asia market this year, particularly compared to 2018's banner results.
Despite significant geopolitical and economic uncertainty, Europe saw a record-breaking quarter of US$9.79 billion of investment - which propelled total annual investment in the region to a new year to date record high of US$28.76 billion with a full quarter left to go.
“The automotive and mobility sectors have been incredibly hot this quarter, particularly in Asia where funding has been very weak overall,” said Kevin Smith, Co-Leader, KPMG Enterprise Emerging Giants Network, KPMG International and Head of Clients and Growth -- National Markets, Partner, KPMG Enterprise in the UK. “Heading into Q4'19 and into 2020, these sectors are expected to continue to attract significant investment globally - joined by fintech, healthtech, biotech, and cybersecurity.”
The US saw US$28.19 billion in VC investment in Q3'19. While a decline over Q2'19, the amount remained relatively robust compared to previous quarters - particularly given deal volume dropped to a ten-quarter low of 2,265. The robustness of the US market was carried in part by the widespread diversity of companies attracting investment, fintech Misson Lane (US$500 million), insurtech Compass (US$370 million), transportation company Lime (US$310 million), and others.
Following a jaw-dropping US$141 billion in exit activity in Q2'19, the US saw exit activity drop back to a still robust but much lower US$35.4 billion.
While VC investment in the Americas dipped slightly to US$30.83 billion, strong funding rounds in Mexico, Brazil and Canada suggested the growing maturity of VC markets outside of the US. Canada set a new quarterly record for VC investment at US$1.45 billion, including a US$250 million raise by Clio, a US$151 million raise by Element AI, and a US$140 million raise by Fusion Pharmaceuticals.
In Brazil, Nubank's US$400 million raise made it the first startup in Latin America to reach a US$10 billion valuation. QuintoAndar also raised US$250 million, while Madeira raised US$110 million. Mexico also saw a strong quarter, with fintech company Smart Lending raising US$80 million and Klar raising US$57.5 million.
Europe saw US$9.79 billion in VC investment in Q3'19, just eclipsing the quarterly record set in Q2'19. At the end of Q3'19, the region has already exceeded the total VC invested during all of 2018. Despite the impending October 31, 2019 Brexit deadline, VC investment in the UK accounted for its third highest quarter of investment ever with US$2.99 billion. This despite a decline in the number of VC deals to 245 - the lowest deals volume in the UK since Q3'12.
Germany set a new quarterly record for VC investment in Q3'19, attracting US$2.29 billion - led by the US$564 million raise by FlixMobility. Deals in Sweden (Klarna: US$460 million), Belgium (Drylock Technologies: US$167 million), Israel (Monday.com: US$150 million), and Switzerland (Acronis: US$147 million) rounded out the top 10 deals in Europe - showcasing the continued diversity and health of the VC market in Europe.
VC investment in Asia was US$14.92 billion during Q3'19 - down more than US$10 billion compared to the US$25.32 billion raised compared to Q3'18. News in Asia was not all negative, however. The total number of VC deals in the region rose quarter-over-quarter, from 839 to 922. The increase in deals activity despite the decline in investment volume highlights the ongoing interest in the region, although VC investors have continued to hold back from making the massive deals that characterized 2018. China still accounted for 7 of Asia's top 10 deals this quarter, including the top deal: a US$700 million raise by NetEase Cloud Music. India saw a resurgence in deals activity - led by a US$490 million raise by Ola.
At the end of Q3'19, year-to-date global VC investment in cybersecurity-focused companies reached US$5.8 billion - not far off the record US$6.4 billion set during 2018. Given the increasing focus on technology innovation across sectors in all regions of the world - and the rapid evolution of cybersecurity risks, there is likely no end in sight as to the growth in cybersecurity investment.
While global VC investment is expected to fall well short of the record levels seen in 2018, annual results are expected to be very robust compared to all previous years. Europe is well-poised for continued VC investment growth despite the uncertainties associated with Brexit, while investment in the US and Americas is expected to continue to hold relatively steady. Given US and China trade relations, VC investment in Asia will likely remain soft into Q4'19.
“2019 has been a strong year so far for unicorn exits, although the resulting IPOs have been mixed with some companies seeing results well above expectations and others well below,” said Conor Moore, Co-Leader, KPMG Enterprise Emerging Giants Network, KPMG International and Partner, KPMG in the US. “While it will be important to watch the performance of these companies over the longer term, one clear message we've seen is the importance of profitability and strong governance. Looking forward, VC investors are likely going to put more emphasis on these two areas when making investments - particularly during later stage rounds.”
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