According to KPMG´s Venture Capital market report, it experienced the highest amount of investment in the U.S. in 2017. The total amount of investment in this sector was over $84 billion last year. Although, the deal value increased from $21.24 billion in the third quarter to $23.75 billion in the fourth quarter, the overall deal volume experienced decline as it fell from a total of 1997 to 1778 deals. The reason for the decline was growing interest of investors in smaller companies with profitable prospects instead of placing bigger bets on large companies.
Sneak-peak at 2017
The investors in the United States were mainly focused on late-stage deals during 2017. This eventually lead to the decrease in deals with other funding levels. Seed and angel deals were the ones that got affected the most as they suffered a decline from 50 percent in 2016 to 47 percent in 2017.
Biotech and healthcare were two sectors that stood out among the rest, especially during the fourth quarter when a number of large deals were successfully completed. Healthcare sector was also at the top in terms of exits, which triggered an increased activity overall.
The late-stage deals hit $250 million in the last quarter of 2017, which was very high as compared to $135 million a year before that. Companies that raised funds of over billion dollars were Cancer-screening biotech Grail Technology that raised $1.2 billion and Ride-hailing company Lyft that managed to get $1.5 billion.
Expected Trend in 2018
The trend seems quite optimistic as it will build momentum, especially via strong exit markets in Mergers and Acquisition and Initial Public Offering (IPO) for companies backed by venture capital.
At this time, it isn’t sure whether 2018 will have a record number of IPOs as experienced in 2015 or not, but this year will definitely have an increasing number of IPO activities. The co-lead partner of KPMG VC practice, Conor Moore, was of the opinion that as more firms are deciding to remain private in the long run, the secondary market is sure to experience more growth.
Following are some of the prominent sectors investors are likely to invest their money in:
Instead of investing directly in the cryptocurrency, investors are inclined to invest in underlying blockchain technology. The reason is simple; the prices of digital currencies have skyrocketed. Investors are trying to find creative ways to make profitable investments.
A partner in Canvas Ventures, Rebecca Lynn, is looking for firms that use blockchain to build their infrastructure, especially the ones that store health records and track trademarked and copyrighted licensing rights and content.
Artificial Intelligence Businesses
Investors are searching for tangible business ideas. For example, David Pakman, a partner in Venrock, is in search of startups that will be using Artificial Intelligence so as to assist companies in making decisions that were previously taken by the people; it includes preparing manufacturing instructions for machines, sales planning, and the hiring process.
With the rapidly increasing concept of driver-less cars, startup companies are in for a treat. Venture capital firms, such as the Fifth Wall are offering a short-term lease for pop-up stores, including parking lots. Some startups that can benefit from this are Katerra (a construction company), Kasita.com (the firm that makes modular housing units), and Factory OS (a company that makes modular buildings).
These devices have taken the market by storm. This has encouraged startup companies to seek new opportunities to use voice, including advertising. It has been predicted by WIRED that new firms with creative solutions are expected to do really well in 2018, which makes it an attractive sector for venture capitalists.
In the last few years, VC firms were drawn to digital media startup companies, such as Vox media, BuzzFeed, Mashable, Mic, and many more. However, some of these companies have undergone layoffs in recent times. This has eventually made the investors move on to subscription-based products, such as Patreon. In September last year, this company raised around 60 million dollars.
Another example is Medium, which raised over 130 million dollars from VC firms. This company has shifted to a subscription-based model just recently.
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