2017 turned out to be quite a success for startups as they managed to receive over 67 billion dollars in venture capital funding, broking the previous record of 2015 by 5 percent.
Although, there has been substantial funding in Silicon Valley during the past few years, the overall investment has reduced since 2015. There has been a decline of 12 percent and it’s partially because of Uber Technologies Inc. and Lyft Inc. as these companies secured the maximum funding in 2017. Snap Inc. got a funding of 1.8 billion dollars, whereas Uber secured 3.5 billion dollars in 2016, and the value of capital received in 2017 decreased. Another reason was the fact that some of the major deals happened elsewhere last year.
The Value of Deal Based on Metropolitan Statistical Area
If you look at the trend based on metropolitan areas, San Francisco was in the lead, but as discussed, the overall value has declined since 2015. Similarly, the investment in Boston and Los Angeles has also decreased; it was 6.2 billion dollars and 4.9 billion dollars for Boston and Los Angeles in 2015, but in 2017, the amount reduced to 5.9 billion and 3.9 billion respectively.
On the other hand, the funding in New York, San Jose, Washington D.C., and Chicago increased. In 2015, Chicago secured 0.9 billion dollar investment, which eventually increased to about 1.5 billion dollars in 2017. Washington experienced a mild increased from $1.4 billion to $1.6 billion and San Jose increased from 6.5 billion dollars to 6.9 billion dollars. The investment in New York however, almost doubled since 2015. It was 7.8 billion dollars in 2015, but in 2017, the overall value increased to 13.3 billion dollars.
On the other hand, the funding value also increased in Miami, Philadelphia, Provo, Indianapolis, Charlotte, and Minneapolis. The biggest reason for the sharp increase in the funding value in New York was the massive infusion of money in WeWork Companies Inc. The company got a capital of about 6 billion dollars in 2017, which eventually led to the sudden increase in the overall funding.
2017 Top 10 Deals
After WeWork, the second biggest deal in 2017 was Lyft in San Francisco, the company secured 2 billion dollars in funding. Other deals in San Francisco that made their way to the Top 10 included Uber with $1.25 billion, GRAIL with $0.9 billion, and SoFi with $0.5 billion.
Beside that, Admiral Permian Resources in Midland secured 0.6 billion dollars, Magic Leap in Miami got a capital of 502 million dollars, Outcome Health got 500 million, and SpaceX got 450 million dollars. Another company in New York that made its way to the Top 10 was Compass that secured a capital of 0.55 billion dollars.
All in all, startups in many regions of the U.S. managed to get funding as compared to 2015. In 2017, around 141 metropolitan areas got capital in a total of 48 states, whereas, it was 119 areas of 43 states back in 2015.
Size of Deals
The value of investment received by companies also increased over the years. Although, the total number of deals has declined since 2015, the overall deal value increased by 3 billion dollars. If you look at the average size of a deal, it was 25.5 million dollars in 2017. This has been the highest so far in history. The average size in 2015 was 21.5 million dollars.
The average size of a seed stage investment was also high, i.e., 13.8 million dollars in 2017. It was $11.9 million in 2015. The early stage deals represented almost 33 percent of the total venture capital volume. The value of late-stage deals, however, has declined since 2013.
Number of Initial Public Offerings (IPOs)
The number of IPOs deals around the world was the highest since 2007, but there were only a few IPOs in the United States that were backed by the VCs. There were only 28 companies that went public in 2017, which was quite low as compared to 2015.
Moreover, some of the biggest companies couldn’t perform well in 2017; the 3 largest IPOs showed negative returns. Snap Inc. , the second biggest IPO, showed very poor returns.
To summarize, the VC environment has experienced ups and downs over the years, but the overall trends have been declining with the passage of time.