VC Investment In The U.S. Remains Strong At $28.2 Billion In Q3 2019 Driven By Megadeals Across Several Industries; Top 10 Deals Spread Out Across Country: KPMG Report

Venture capital (VC) investment in the U.S. continued at very high levels during Q3 2019, totaling $28.2 billion across 2,265 deals – even as uncertainty in the U.S. economy and public markets increased, according to the Q3 2019 edition of Venture Pulse – a quarterly report on global VC trends published by KPMG Enterprise.

The quarter’s top deal in the U.S. and globally was the $785 million raised by e-cigarette manufacturer Juul Labs. While there were no billion-dollar deals this quarter, the U.S. continued to see numerous deals between $100 million and $500 million, across a wide variety of sectors, including financial services, mobility, automotive, healthcare and insurance. The top 10 deals also were spread out geographically across the U.S.

Corporate VC investment in the U.S. was solid during Q3 2019, with more incumbents across different industries recognizing the importance of investment in digital innovation in order to grow and retain market share. Given the large number of industries that remain ripe for disruption, and the complex challenges faced by incumbents across every sector, corporate VC investment is expected to remain strong well into 2020.

“VC investment in the U.S. continues to lead the way globally and is likely driving a lot of the investments in other regions, including Europe and Latin America,” said Conor Moore, national private markets group leader in the U.S. “The VC firms and corporates getting squeezed out in the U.S. are now embracing opportunities to invest in other regions.”

Fintech remains a key area for investors
Fintech continued to be a hot area of investment in the U.S. with raises by Root Insurance ($350 million) Robinhood ($323 million) and Clearbanc ($300 million). According to the report, traditional VC investors and corporates realize the need for traditional financial services companies to undertake digital transformations. Companies able to provide the services and digital extensions required to help these organizations become more digital, flexible and responsive will likely remain high on the radar of VC investors for the foreseeable future.

First-time funding sees strong flow of venture capital in Q3 2019
At $7.7 billion invested so far this year, the total sum of VC invested in first-time financings for the U.S. is likely to result in one of the most robust years on record, despite a slowdown in deal volume.

U.S. IPO market a tale of two cities
According to the report, U.S. VC investors are watching the longer term performance of the IPO market. A number of recent unicorn IPOs that were seen as big hits and attracted huge funding rounds have been disappointing for investors.

“Because tech has had such a bullish run, investors expect every company to come out of the gate and go gangbusters,” said David Pessah, senior director, KPMG Innovation Labs. “The historical trend shows that while it might take a bit of time to get going, the best companies just get into the market and grow from there.”

Unicorns remain strong in U.S.
Nineteen companies reached unicorn status in Q3 2019, following 20 in Q2 2019. The report noted that the continued high number of unicorn births reflects the ongoing focus of VC investors on late-stage deals. AI-focused companies – including Scale AI, DataRobot, Argo AI, Icertis and Anduril – accounted for more than a quarter of Q3’s new unicorns.

Cybersecurity a big ticket for VC investors
The broad scope and breadth of cybersecurity has VC investors focused on this space. AI is being used to help companies establish behavioral patterns, track and identify anomalies, and respond to threats in real time.