Total funding to VC-backed companies surged 50 percent globally in 2017, reaching $164.4 billion, with an 11% increase in deal activity, according to a new MoneyTree Report from PricewaterhouseCoopers LLP (PwC) and CB Insights.
Both deal and dollar activity globally surpassed the highs seen in 2015, amid strong Asian and European investment, the report said. Annual funding to VC-backed companies based in the United States increased 17% over 2016, marking it the second year on record with total dollar funding of over $70 billion.
In 2017, $71.9 billion was invested in US VC-backed companies as mega-round activity, defined as financing rounds of over $100 million, hit an annual high of 109, topping the count of 107 in 2015. This funding total was, however, spread across fewer deals, with 2017’s tally of 5,052 down 4% from 5,268 in 2016 and representing the lowest annual total since 2012.
In addition, investment in seed companies in the US fell to a five-year low. Seed activity as a proportion of all deals in the US declined to 27% in 2017, compared to 32 percent in 2016. The share of expansion stage and later stage funding as a proportion of all deals increased, accounting for 21% and 10% of the total deals, compared to 19% and 8% respectively a year earlier.
Funding activity surges in Asia
Funding activity surged in Asia by 117% with $70.8 billion in total investment, up from $32.7 billion in 2016 and nearly matching the US figure. Asia deal count was up 46% to 2,847. Europe deal and dollar activity also saw growth, with funding rising by 40% in 2017 to $17.6 billion and deal activity increasing by 16% to 2,483.
“2017 closed strong because of mega-round activity — a theme throughout the year,” said Anand Sanwal, co-founder and CEO of CB Insights. “It was a record year for these mega-rounds and was driven by what we’d describe as the Softbank Effect. This is the entry of large, deep pocketed investors, ranging from Softbank to sovereign wealth funds from around the globe investing in insurgent startup companies.”
Softbank Group Corp. is a Japanese multinational telecommunications firm whose investment arm has led funding rounds of investment valued at more than $20 billion in a number of privately held firms.
“It is worth noting the pullback in early stage activity and the decline in overall deal activity as compared to recent years. Deals are still being completed, especially the bigger ones, but the early-stage activity which is vital to the VC ecosystem’s health did take a hit.” Sanwal said.
Through 2017, 22 new unicorns were created in the US, up from 2016 but significantly below the peak of 41 in 2015.
Funding to AI startups in the US topped $1 billion every quarter through 2017. Compared to 2016, total annual funding in AI firms in the US increased 28% in 2017 to a total of $5 billion across 444 deals. Insurance tech firm Lemonade, founded by Israelis and headquartered in New York, was the US artificial intelligence company that raised the largest amount of money in 2017, raising 120 million in funds from Google Ventures, Menlo Ventures, Sequoia Capital and SotfBank Group.
Total annual funding to US cybersecurity companies increased 40% in 2017, despite three fewer deals occurring, to over $3.7 billion. The figure tops the $3.2 billion seen in 2015, setting a new annual high, the report said. Total annual funding to US genomics companies jumped 142% to over $2.5 billion, more than the previous three years combined.
In the US, San Francisco continued to be the region with the highest annual funding level at $17.1 billion in 2017, despite seeing decreases in annual funding for VC-backed companies in both deal count (-12%) and investment amounts (-8%) from 2016, the report said.