U.S. venture capitalists set for record growth rate this year

Despite apprehensions of a corrections in venture capital funding, data from PitchBook Data Inc and National Venture Capital Association point to a bonanza year.

According to a report that was released on Wednesday, U.S. venture capitalists are likely to sink in more than $100 billion into startups for a second straight year.

Already in the first three quarters, venture capital firms have invested $96.7 billion in 7,862 funding deals, as per a report by venture capital database PitchBook Data Inc and National Venture Capital Association.

These investments comes despite apprehensions by Silicon Valley investors that investments in startups could face a correction following sharp rises in valuations across several years which have created an unprecedented number of unicorns.

Fears of a setback were heightened by high profile initial public offering (IPO) flops such as those of Uber Technologies Inc and Lyft Inc; the plunging valuation of WeWork Companies Inc, as it tried to go public, also did not help.

So far, the money in the pipeline is still flowing with several venture capitalists saying although the number of deals have come down however, their size have become bigger.

As per the latest PitchBook data, the number of deals valued at over $100 million are set for a record count in 2019.

According to Craig Sherman, a partner at law firm Wilson Sonsini Goodrich & Rosati, he’s still seeing quite a few large deals coming down the pipeline.

“When the market is really bad and there’s a correction, deals that have signed term sheets will often die ,” said Sherman. “We definitely are not seeing a meaningful market correction right now.”

Last week, scooter sharing company Bird stated, it had raised $275 million with a valuation of $2.5 billion before the investment; this is despite the skepticism that bike and scooter sharing companies could ever become profitable.

Last week at a tech conference, Bird CEO Travis VanderZanden stated, his company changed its focus to emphasize profitability.

“The tech investment community is changing and reacting quickly to the public markets,” said VanderZanden. “If you’re a …growth at all costs company burning hundreds of millions of dollars with negative unit economics, it’s going to be very difficult to get funding moving forward.”

“That concern and the fact that there’s still a lot of late stage capital available could keep venture capital backed funding strong for the next quarter or two”, said Jeff Grabow, US Venture Capital Leader at EY.

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Categories: Creativity, Economy & Finance, Entrepreneurship, HR & Organization, Strategy

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