Overall venture capital (VC) investment dropped from record heights of US$71 billion in the fourth quarter of 2018 to $53 billion in the first quarter of 2019, due to a decline in Chinese investment, among other factors.

The latest KPMG market analysis revealed that while US and European investment remained relatively robust quarter over quarter, Chinese VC fell from $10.1 billion in the fourth quarter last year to $5.8 billion in the first quarter of this year, as ‘megadeals’ took a pause.

Globally, VC deal volume declined for the fourth consecutive quarter with only 2,657 deals - representing the lowest number in 31 quarters - since the second quarter of 2011. The continued decline in deal volume was felt in every region, but was particularly pronounced in Europe - which saw deal volume drop from 882 deals in the fourth quarter of 2018 to 487 deals in the first quarter of 2019.

“We saw a number of distinct trends in the VC market during the first quarter of 2019,” said Arik Speier, head of technology for KPMG in Israel.

“On one hand, deal value remained robust in the US and Europe - powered in large part by big investments in later stage deals - Europe for example had 10 deals at or over $125 million this quarter, compared to only six during Q4 2018 - however, the big question is if we are facing a turning point in the volume of investment, yet to be seen.”

European VC investment remained strong, powered by 10 deals at or over $125 million in value, but deal volume plummeted from 882 deals in the fourth quarter of 2018 to only 487 in the first quarter of 2019.

In the US, the $5 billion raise by shared workspace company WeWork was by far the largest VC deal this quarter, dwarfing the next biggest round. Other big deals this quarter included Nuro ($940 million), Rivian ($700 million), Aurora ($530 million), Clover Health ($500 million) and SpaceX ($500 million).

The Americas also remained strong with a series of mid-sized deals. In Canada, Turnstone Biologics' $42 million raise showcased the ongoing strength of biotech and life sciences investments in the country, while platform-based offerings saw a $40 million raise by asset maintenance and management platform Fiix and a $30 million raise connected car platform company Mojio.

In Europe, VC investment saw mixed results this quarter, perhaps influenced by ongoing geopolitical uncertainty and associated challenges with Brexit, according to KPMG. Despite the heightening level of uncertainty, many countries within Europe saw significant interest from VC investors.

Overall VC capital investment reached $6.5 billion during the first quarter this year, just shy of the record high established in the final quarter last year. However, deal volume plummeted, falling from 882 in last quarter to only 487 this quarter - representing the lowest quarterly total since late 2010.

The 10 largest deals in Europe this quarter were spread among 6 different countries, including three from Germany – N26 with $300 million, BioNTech with $211.5 million and Wefox with $125 million.

There were also two large French deals - Doctolib at $174.8 million and Ynsect at $128.2 million - and two big deals in the UK - Ovo Energy at $281.6 million and iwoca at $195.6 million.

The first three months of this year saw the birth of 24 new unicorn companies globally across a wide range of verticals, including 15 companies in the US and four in China.
However, the unicorn club reached beyond the US and China, and included Australia-based Airwallex, India-based BigBasket and Delhivery, France-based Doctolib, and Germany's N26.

FinTech companies accounted for four of the unicorns birthed this year, including Airwallex, Marqeta, Chime and N26.

“Since 2014 the number of active US unicorns has more than doubled to over 160 as private capital is readily available allowing companies to stay private longer,” said Brian Hughes, national private markets group leader for KPMG in the US. “After waiting for years, we finally saw some unicorns choosing to go public in late 2018. We anticipate this trend will continue well into 2019 – spurred by recent high profile offerings such as Lyft, and the ongoing strength of the public markets.”

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