Startups attract record level of funding from venture capitalists

17 July 2018 Authored by Consultancy.eu

Investments in startups reached a record level in the second quarter of this year. A whopping $71 billion was invested in startups globally, an increase of more than 20% compared to the first three months, according to new research by accountancy and consultancy firm KPMG.

In particular in Asia venture capital levels boomed, soaring $20.5 billion to almost $36 billion. Startups in China took the lead in the surge: eight of the ten largest transactions globally in the second quarter took place in China. Half of the cases involved 'megadeals', investments of more than $1 billion; Ant Financial (with $14 billion the largest startup finding transaction ever), Weltmeister ($3.2 billion), Pinduoduo ($3 billion) and Manbang Group ($1.9 billion). 

In the United States investments in startups remained substantial, with the financial injections of $2 billion in Faraday Future and $600 million in Uber competitor Lyft the most notable deals.

Global venture financing by stage

In Europe, however, investments flowing to startups fell compared to the first quarter of this year – funding dropped from $6.1 billion to $5.6 billion. The number of European transactions also fell significantly, from 776 in the first quarter to 631 in the second quarter. This development is in line with the worldwide trend: the volume of venture capital transactions decreased from 3,544 in the first three months of this year to 3,108 in the second quarter of 2018. 

The United Kingdom has regained its spot as the largest breeding ground for venture capitalists in Europe. Six of the top ten European deals took place in the country: Revolut ($250 million), FreelineTherapeutics ($119 million), CRM Surgical ($100 million), Liberis ($81 million), Culture Trip ($80 million) and Crescendo Biologics ($70 million). Germany saw the level of financial injections drop slightly, while France saw its total transaction value increase. 

In total, $71 billion was invested in startups in Q2. In comparison, the four quarters of 2017 saw total spending reach $150 billion. 

Corporate venturing

The study by KPMG also shows that large corporates are increasingly joining in the battle for startups. The share of venture capital expenditures closed by companies (corporate venturing) has now risen to over 20% – the highest point since the researchers started their tracking levels back in 2010. Sectors that are very active in corporate venturing include financial service providers (they invest mainly in FinTech and InsurTech), automotive players and retailers. 

Global venture financing by sector

From a sector perspective, software & IT remains the largest destination for venture capital funding, followed by pharma & biotech. The consumer goods sector comes in at third place. Sectors that are making significant progress include agriculture (last year investments in agricultural technology reached a record-breaking $1.7 billion) and automotive (considerable investments are being made by automotive firms in startups with knowledge of robotics and self-driving cars). 

Related: European private equity market to see solid 2018 on strong fundamentals.

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