Venture capitalists invest US$56b in start-ups

SAN FRANCISCO: Venture capitalists poured US$15bil into start-ups in the third quarter, putting this year on pace to be the third largest ever for investment activity, according to a report.

So far this year, venture-backed companies have raised US$56bil across nearly 6,000 funding deals, according to a report from venture capital database PitchBook Data Inc and the National Venture Capital Association.

At that pace, venture investment is projected to hit US$74bil by year’s end, falling short only of the investment levels in 2000 and 2014.

The data shows that despite long-held fears of a contraction in venture capital that would force start-ups out of business, investors continue to enthusiastically back promising technology companies.

“The rounds keep getting bigger,” said Adley Bowden, vice-president of analysis for PitchBook. “As valuations go up and (venture) firms are trying to get a certain ownership percentage, the check size goes up as well.”

Late-stage venture rounds have spiked most significantly, with the median round size at about US$10mil, up from a little more than US$6mil in 2013.

“The Airbnbs and the established unicorns ... are not having trouble raising capital and very large rounds,” Bowden said.

Mutual funds, hedge funds and sovereign wealth funds – contrary to widely held expectations that they would flee venture capital amid the slowing initial public offering (IPO) market – continue to invest heavily in “unicorns,” the term for venture-backed companies valued at US$1bil or more. — Reuters