In H1 2015, US-based companies received 1,922 venture capital financings with an aggregate value of $35bn – the highest semi-annual aggregate value of venture capital financings in the US on record. This value surpassed that of full year values in 2007-2010 and came close to the full year values of 2011-2013. If H2 2015 continues in the same vein as H1, then the year would end with an aggregate value of approximately $70bn, a substantial $16bn higher than the current highest year on record (2014, with an aggregate value of $54bn).
Despite this high aggregate deal value, Preqin’s Venture Deals Analyst database shows that H1 2015 accounted for the lowest number of deals in comparison to all January-June periods since H1 2009. Consequently, the average deal value of venture capital financing has risen in the first half of this year to $20mn, and is higher than in any other half-year period. A possible causal factor would be the 168% increase in the average value of later stage (Series C-J) deals from $19mn in H1 2007 to $51mn in H1 2015.
Taking a closer look at the breakdown of late stage financings by industry we find that financings in the healthcare sector are the most numerous among later stage venture capital deals. Of the 239 late stage investments in H1 2015, the healthcare sector accounted for 58 deals, followed by the software and internet sectors with 52 and 48 deals respectively. This contrasts to the industry overview of early stage financings (angel, seed, Series A-B) where the capital-intensive healthcare industry comes only third, accounting for 178 deals in H1 2015, compared to the software and internet sectors with 302 and 213 deals respectively.
However, it was an online company, Airbnb, which received the largest venture capital financing witnessed in the US (and globally) in H1 2015. The $1.5bn investment round in June 2015 was led by new investors General Atlantic, Hillhouse Capital Management and Tiger Global Management. Other investors involved in the deal included Baillie Gifford, CBC Capital, GGV Capital, Horizon Ventures, Kleiner Perkins Caufield & Byers, Temasek Holdings, Wellington Management and returning investors Fidelity Equity Partners and T Rowe Price.
While the average value of late stage venture capital investments in more mature companies continues to increase, exit activity in the US has experienced a slowdown. There were 355 venture capital-backed exits in the US in H1 2014, valued at an aggregate $48bn, followed by 299 exits valued at $23bn in H2 2014, and a further decrease in H1 2015 with 284 exits at an aggregate value of $20bn. Nonetheless, the record-breaking average and aggregate deal value of venture capital financings in the US lays out a promising foundation for the rest of the year’s US venture capital activity.