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Venture funding hits blockbuster quarter

While different reports may vary on the numbers, they still show the VC market gaining strength

Financial trends and news by Steven Loeb
July 12, 2018
Short URL: http://vator.tv/n/4bcd

When covering different markets or sectors, you're going to have a lot reports thrown at you in regards to how things are trending, whether the numbers are going up or down. It's tempting to take them all at face value, until you realize that there are two reports that say something different and then you have to decide which one to trust. Or perhaps you decide that neither one is accurate. 

The truth is that not every report is "complete" and not every report provides the most accurate picture. But they're still very helpful to understand the direction that things are going in, even if they don't say the exact same thing. 

On Thursday, two different organizations released reports on the state of venture capital investing in Q2 2018: the Dow Jones VentureSource 2Q’18 U.S. Venture Capital Report and the Q2 2018 Moneytree Report from PricewaterhouseCoopers and CB Insights. Both reports paint the same general picture: that the venture capital industry is healthier than it has been in at least a few years. However, the numbers are slightly different, so it's hard to take either one as the absolute truth regarding the state of the market. 

Let's see how these two reports compare.

VC investing

According to Dow Jones, there was $27.08 billion invested in Q2, across 1,426 deals. That represents an increase of 4 percent in terms of dollars and a 0.3 percent increase in deals quarter-to-quarter.

PricewaterhouseCoopers, on the other hand, has the number pegged at $23 billion across 1,416 deals, for an increase of 3 percent and 9 percent, respectively, from Q1.

Comparing these numbers, there's not much a different between the two reports in terms of the number of deals this past quarter (they are only separated by 10 deals, or less than 1 percent) but the amount invested is significantly different; Dow Jones has the amount 17 percent higher than PricewaterhouseCoopers and CB Insights. 

The difference between the two numbers might come from methodology; while Dow Jones says it collects data "through surveys of professional firms, interviews with company executives, and from secondary sources," PricewaterhouseCoopers says it gets its data from "(1) various federal and state regulatory filings; (2) direct confirmation with a firm or investor; (3) press release; or (4) credible media source." So it's possible that Dow Jones included information that was not released publicly. 

Either way, they both say the same thing: the numbers in Q2 are the highest they have been in at least the past three years, and that the state of venture capital right now is strong. 

Investing by stage

Both reports broke down the stage at which most funding was coming, though they came it in different ways: Dow Jones broke it down by the amount invested, while it was broken down as a portion of deal activity in the PricewaterhouseCoopers report. 

According to Dow Jones, the vast majority of the funding, 61.5 percent, went to later stage companies, with a 15 percent increase quarter-to-quarter. Funding at the seed stage also rose 25 percent. Meanwhile, the amount going to companies raising their first and second dropped 15 percent and 22 percent, respectively. 

The report from PricewaterhouseCoopers showed only 11 percent of deals going to later stage companies, while 23 percent went to those in the "expansion stage" which is somewhere in between early and late stage. If those are added up they come to 34 percent of all deals. 

The percentage going to all categories stayed relatively the same.

In this case having both reports is valuable since they both show a different side to what stages are seeing the most investments. The Dow Jones report shows that late stage deals are taking up a huge portion of funding, but the PricewaterhouseCoopers report shows that, despite that, roughly half of all investments are going to either seed or early stage companies. Taken together, they give a more complete picture of how investors are deploying their money. 

Investing by region

Finally, both reports broke down which region saw the most activity. It's no surprise that the Bay Area came out on top but, again, the numbers were different.

The Dow Jones report pegged San Francisco/Bay Area as having seen 447 deals, with $10.49 billion invested. While PricewaterhouseCoopers separated out San Francisco and Silicon Valley, combined they have 437 deals and $9.53. That's a 2 percent difference in terms of the number of deals, and a 9 percent difference between the two reports in amount invested. 

Both reports also put New York in second place for funding and deals, with Dow Jones showing the region having 199 deals, 3 percent higher than the 193 from PricewaterhouseCoopers, with $3.31 billion raised, 15 percent higher than the $2.8 billion in the second report. 

While the numbers may not be exactly the same, anyone reading either these two reports will get the same idea: that while the Bay Area is the leader in the tech world, New York is the second best place to go in the country for venture funding. 

(Image source: hec.edu)


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