As the world is becoming faster each day, the trend of doing business with startups is also increasing, and people are finding different opportunities to get capitals for their business.
The trend of venture capital firms is also increasing each year as it is a well-known fact that venture capital financing is not an easy type of funding due to the strict process involved in obtaining one.
The latest 1Q Venture Capital valuation report for 2018 published by KPMG[1] and Pitchbook[2], shows the key trends which are currently making a buzz in the Venture Capital communities. Here are the key takeaways from the report:
#1 Takeaway: A new global record of total capital invested across 2,661 deals
Globally, venture capital-backed companies witness yet another milestone of total funds ($49.3 Billion) raised in Q1’18 barely fallen shy of $50 billion. For the fourth consecutive quarter (Q3’15, Q2’16, Q4’17 & Q1’18), VC investment has exceeded $45 billion.
This feat is as a result of the steady decline in the tally of completed venture rounds worldwide, most dramatically at the early stage. From the analysis gotten from pitchBook, it shows that there’s a 19% increase at the late stage, where the median pre-money valuation pushed to $75 million, and a jump from 2017.
#2 Takeaway: Artificial Intelligence (AI) remains a driving growth in VC investment
Artificial Intelligence (AI) pulled significant investment deals during Q1’18 for the fact that it is considered one of the most transformative technologies in existence, with broad applicability across major industries.
Although, one of the most significant setbacks to robust AI offerings seen over the past few quarters has been the availability and quality of data to teach and implement AI effectively. To solve this problem, strategic investors are providing liberal funding at premium prices for acquiring the right data in sufficient quantities which will in turn help in the advancement of their businesses. AI is a trend that will only continue to gain more momentum in the foreseeable future.
#3 Takeaway: ICOs are becoming more conspicuous, so is the need for wider blockchain solutions
Quite a few numbers of startups globally have looked at Initial Coin Offerings (ICOs) as an alternative to the traditional funding mechanism. While some investors and regulators still view ICOs with some cynicism, the ICOs usage has become more mainstream.
The large usage of ICOs as an alternative means for crowdfunding has ignited the needs for angel investors to invest in more broader blockchain solutions to help in facilitating payments and remittances.
Some countries such as Switzerland and Japan have proactively support ICOs, and if more countries solicit for its concept, overtime ICOs could have a crucial impact on the VC market.
#4 Takeaway: A shift toward funding more mature companies
Q1’18 experienced a change in the median age for companies receiving financing, pushed to three years – twice as old as a decade ago. This shift is as a result of older and more matured businesses, raised a higher number of VC rounds most especially in the angel & seed stage.
It is seen that large seed financing now comes with a trade-off of giving up more equity. We see this shift as evidence that companies are now being more fully valued at the angel & seed stage, with investors tempering their expectations for unchecked valuation growth going forward.
#5 Takeaway: Trends to watch – AutoTech, HealthTech, and AI
Autotech and healthtech are one of the hottest areas to watch out for over the next quarters as Autotech continues to be a big investment play globally in Q1’18 while healthtech continues to gain more grounds around health sectors gradually.
Traditional corporates have recognized that they need to transform their business model – thus the growing interest in Autotech and Healthtech.
CONCLUSION
Well, that’s the few highlights from the venture capital report for the 1st quarter of 2018. It is advisable that entrepreneur/startups go through the complete guide to gain more insight into the process, the anticipated deal term, and the potential issue that may arise from venture capital financing.
[1] https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2018/04/kpmg-venture-pulse-q1-2018.pdf
[2] https://files.pitchbook.com/website/files/pdf/PitchBook_1Q_2018_VC_Valuations_Report.pdf
