KPMG Venture Pulse 2018 Q1

Jul 14, 2018 | Publisher: Techcelerate Ventures | Category: Business & Economics |  | Collection: Investments | Views: 23 | Likes: 1

1 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Venture Pulse Q1 2018 Global analysis of venture funding 11 April 2018 2 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Welcome message Welcome to the Q1'18 edition of KPMG Enterprise's Venture Pulse Report a quarterly report highlighting the key trends, opportunities, and challenges facing the venture capital (VC) market globally and in key jurisdictions around the world. Q1'18 got off to a strong start, with five $1 billion+ mega-rounds, including two massive deals in Southeast Asia ($2.5 billion to Singapore-based Grab and $1.5 billion to Indonesia-based Go-Jek). U.S.-based Lyft, Uber and Faraday Futures accounted for the other mega-rounds. The U.S. continued to be the dominant market for VC investment, although investors have expanded beyond Silicon Valley to identify investment opportunities. Globally, investors have also diversified, making investments in a broader range of locations than ever before. Softbank, which announced a $100 billion Vision Fund in 2017, played a big role in a number of this quarter's largest deals. Softbank's new fund continued to create ripples in the VC market, with other VC firms expected to respond with other mega-funds in order to compete effectively. Ride-sharing was a big winner of VC investment this quarter as companies vied for market dominance in less saturated jurisdictions. The broader autotech sector was also high on the radar of investors, with everything from autonomous driving to electric vehicles. Artificial Intelligence (AI) was also a very hot sector in Q1'18, while the broader applicability of blockchain received a significant amount of interest. Looking ahead, there is optimism for the remainder of the year in most jurisdictions around the world despite some uncertainty over the impact of U.S. trade tariffs and the upcoming elections in a few key jurisdictions in Latin America. In this quarter's edition of the Venture Pulse Report, we look at these and a number of other global and regional trends, including: The diversification of VC investments, both within the U.S. and globally. The increasing excitement around the applicability of AI in healthcare. The potential implications associated with Initial Coin Offerings (ICOs). The longevity of ride-sharing as an investment sector and whether it is reaching its peak. We hope you find this edition of the Venture Pulse Report insightful. If you would like to discuss any of the results in more detail, please contact a KPMG adviser in your area. You know KPMG, you might not know KPMG Enterprise. KPMG Enterprise advisers in member firms around the world are dedicated to working with businesses like yours. Whether you're an entrepreneur looking to get started, an innovative, fast growing company, or an established company looking to an exit, KPMG Enterprise advisers understand what is important to you and can help you navigate your challenges no matter the size or stage of your business. You gain access to KPMG's global resources through a single point of contact a trusted adviser to your company. it is a local touch with a global reach. Jonathan Lavender Global Chairman, KPMG Enterprise, KPMG International Brian Hughes Co-Leader, KPMG Enterprise Innovative Startups Network, KPMG International, and Partner, KPMG in the U.S. Arik Speier Co-Leader, KPMG Enterprise Innovative Startups Network, KPMG International, and Partner, KPMG in Israel Contents 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 6 Global Americas 29 42 U.S. 61 Europe 84 Asia Total capital invested reaches $49 billion in Q1'18 Global median deal sizes increase dramatically for early and late stage VC First time financings plummet in capital invested and deal count Global venture investment in AI for healthcare remains strong VC hits record levels driven on back of U.S. strength Total venture capital invested soars past $29 billion a new quarterly record Median deal size for Series A reaches new peak of $9.2 million Canadian VC reaches $800 million powered by 7 financings in excess of $20 million Mexican VC drops dramatically hampered by political and trade concerns Total capital invested soars past $28 billion to a new quarterly record Median deal size for Series D+ reaches $40 million Angel/Seed deal value share plummets from 8.6% in 2017 to 6.8% in 2018 (YTD) Corporate VC reaches record levels VC investment remains robust in Q1'18 Median deal sizes skyrocket for early stage and late stage deals CVC participation closes in on 25% of all VC deals First time venture financings remain weak Germany, Spain and France see a jump in venture financing Venture financing sustains historic highs as VC volume evens out Corporate participation nears 35% of all deals Mega deals in Singapore and Indonesia lead the way Exit activity slows considerably 4 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Q1'18 summary Aggregate VC invested soars past $45 billion for the fourth quarter in a row Not so long ago, it was considered remarkable that VC invested worldwide flirted briefly with $50 billion in two given quarters, Q3'15 and Q2'16. But now, for the fourth consecutive quarter, VC invested has exceeded $45 billion, and in the most recent quarter, just barely fallen shy of $50 billion once more. This munificence occurs in tandem with a slow but steady decline in the tally of completed venture rounds worldwide, most dramatically at the early stage. The venture industry appears to be in the throes of a late-stage investment cycle, which in turn has been inflated and prolonged by a decided boom in capital in the private markets, fed by growth in financial markets since the global recession. Massive late-stage deals still boost total figures, yet become even more numerous 2017 was marked by mammoth financings across the board, and 2018 is following suit, with five transactions exceeding $1 billion handily and one huge funding Grab's $2.5 billion Series G round in particular dominating. Although their aggregate is not as enormous as has been seen in the past, with some quarters racking up to six or seven multibillion dollar rounds, it is worth noting that already there have been well over a hundred Series D or later financings in 2018, well on pace to at least match the tallies seen in 2016 and 2017. Moreover, among the top deals for the quarter across multiple regions, hardly any fall below $100 million in size. The most exuberant stage for valuations slides just slightly By and large, venture valuations remain at historic highs. Nearly every series of financing saw median pre-money valuations soar even higher in the first quarter of 2018, barring just one: Series D or later. As the year progresses, the magnitude of increases and decreases will likely reduce as more rounds are closed so the mild decline in latest-stage valuations should not be overstated. That said, it is interesting to note that between 2015 and 2016, there was a similarly mild decline in valuations, potentially due to upsurge in choppiness across financial markets and concern around some macroeconomic trends at that time. As 2018 kicked off in much the same way, and recent tensions around trade have only intensified, perhaps that mild decline in the most exuberant of valuations could solidify. In the wake of highest quarter ever, 2018 starts off strong Q4'17 saw the highest quarterly tally for VC invested in Europe-headquartered companies, just barely soaring past $6 billion to even outpace the $5.9 billion recorded in Q2'17. It is worth noting that within Europe, the impact of outliers is that much more significant, much as is seen in the Asia-Pacific region. That said, as various metropolitan areas across the continent such as Paris, Berlin, Madrid, etc. continue to see their more prominent, mature companies rake in plenty of capital, it is a testament to the ongoing attraction of the European tech scene across key software-enabled segments. After three torrid quarters, Asia sees the flow of capital moderate Similarly to Europe, key metro areas in a few countries are powering the Asian region's overall venture scene; Beijing was the most prominent last quarter, but now the title of the largest financing round of the quarter in the region goes to Singapore's Grab. This is a sign of how, albeit slowly, the region is seeing domestic capital and entrepreneurial ecosystems mature and grow, supporting startups to the extent they are able to rake in such massive sums in order to corner regional markets in segments such as ride-sharing. All currency amounts are in USD, unless otherwise specified, data provided by PitchBook. 5 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Q1'18 summary Corporate participation and corporate rounds signify industry evolution In this edition of the Venture Pulse, the first to incorporate 2018 data, corporate financings of companies that otherwise meet all other criteria for venture-backed financings are included for the first time. Given the evolution of private markets and the venture industry in general, most notably the significant increase in corporate VC participation rates, this change was necessary to truly reflect the importance of the role that strategic acquirers and related investment arms are playing in the current landscape. Especially as private companies continue to elect to grow while staying private, more and more companies are looking to gain or maintain exposure to innovation within the private sphere, whether it be financial or related to intellectual property. Participation rates are at all-time highs. The fundraising cycle experiences an upward spurt On a quarterly basis, the volatility seen in fund closes can be more obscuring than enlightening. For example, in the most recent edition of the Venture Pulse, on a yearly and quarterly basis it seemed that the fundraising cycle could be geared for a cyclical decline, albeit mild. However, Q1 2018 saw a surge upward in the number of fund closes, although VC raised still remained relatively low to recent heights (although well within historical norms). On the surface, this could seem to contradict the conclusion drawn in the prior Venture Pulse. However, quarterly figures are more indications of momentum than anything else and it is especially worth noting that aggregate capital raised is still trending lower than recent highs, when the venture industry on the whole was much more exuberant. Especially as dealmaking indicates that the industry is progressing through the later stages of a prolonged cycle, it is likely that fundraising on the whole is still headed for a gentle downturn. Longer-lived exit cycle could bode well for ongoing liquidity, though hurdles remain When analyzing quarterly exit activity for VC, it is particularly important to bear in mind just how prolonged cycles within the industry can be. Since early 2015, there has been a clear yet slow-paced decline in the volume of venture-backed sales, even though quarterly tallies of exit value have remained remarkably steady by and large. Thus, predicting liquidity crises, especially for late-stage backers, would still be premature, especially as the decline in exit volume appears to have leveled off. That said, the appetite on the part of public market investors and strategic acquirers the only possible exit routes for the most heavily valued venture-backed companies will likely remain critical. And, given that few tech giants can still acquire many unicorns, public market sentiment is expected to be an increasingly important variable for sellers to consider. All currency amounts are in USD, unless otherwise specified, data provided by PitchBook. Globally, in Q1'18 VC-backed c $49.3B ompanies raised across 2,661 deals 7 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global VC market starts year with a bang on the back of $1 billion+ mega-rounds VC investment globally got off to a good start in Q1'18, with five $1 billion+ mega-deals driving funding up despite the ongoing decline in the number of VC deals. The U.S. accounted for well over half of global VC investment, although strong results were also seen in Europe and Asia. While the UK and China saw less VC investment this quarter than usual, less mature VC markets picked up the slack, including France, Indonesia and Brazil. Dry powder still permeating VC market Globally, there continued to be a significant amount of dry powder in the market during Q1'18, with VC investors feeling under pressure to deploy funds raised. This continued to drive bigger deals, more competition for deals and higher valuations in jurisdictions like the U.S. VC investors remained selective in deal-making, more willing to place bigger bets on a smaller number of high quality deals even if they had to compromise somewhat on valuations. Compared to last year, even the median size of early stage deals has grown a trend expected to continue for the next few quarters. Softbank Vision Fund propelling global mega-deals, causing other VC funds to respond Following on the creation of its $100 billion Vision Fund, Japanese growth investment fund Softbank has made a number of significant investments. In Q1'18, Softbank participated in four of the quarter's largest deals as either a major or sole funder1. Softbank's attention focused primarily on software platforms across several industries, including Uber (ride- hailing), DoorDash (food delivery) and Katerra (construction). With Softbank funding major mega-deals, other large VC funds are being forced to respond. While much smaller than Softbank's initiative, other firms are raising capital to better compete with Softbank. Already in 2018, Sequoia Capital has made inroads in collecting $12 billion across several funds, Battery Ventures raised $1.25 billion for new funds and Khosla Ventures added an additional $400 million for a total of $1.4 billion for two new open funds. Six different countries see new unicorns birthed in Q1'18 New VC backed unicorn companies those with $1 billion+ valuations were spread across the globe in Q1'18. While the majority of new unicorns appeared in the U.S., including Snowflake, HeartFlow and DoorDash others reflected the growing number of innovation hubs globally, such as Cabify in Spain, Canva in Australia, Nubank in Brazil, OrCam in Israel and CAOCAO in China. Nubank was particularly exciting as it was one of Brazil's first VC backed unicorns. 1 http://fortune.com/2018/03/22/venture-capital-funding-gap-softbank/ 8 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global VC market starts year with a bang on the back of $1 billion+ mega-rounds, cont'd. Vast applicability of AI driving growth in VC investment After a record setting year of investment in 2017, AI continued to garner a significant amount of investment in all regions of the world during Q1'18. AI is considered one of the most transformative technologies in existence, with broad reach and applicability across industries and verticals. Financial services has been on the forefront of AI usage, although healthcare is quickly gaining significant momentum, likely as a result of the significant diversity of healthcare related AI capabilities being developed. One of the biggest roadblocks to strong AI offerings seen over the past few quarters has been the availability and quality of data to teach AI effectively. To help address this, a number of companies have been conducting strategic acquisitions in order to gain the right data in sufficient quantities they need to better train their AI solutions. It is expected that AI will only continue to gain momentum in the foreseeable future. Ride-sharing VC investments reaching fever pitch Despite being seen as a saturated market in some countries, ride-sharing continued to attract massive investments during Q1'18, with Grab in Singapore raising $2.5 billion, Go-Jek in Indonesia raising $1.5 billion and Uber raising another $1.25 billion. The massive deals in Southeast Asia likely reflect the heating up of competition in markets that have been somewhat overlooked to date. There is little doubt that ride-sharing is reaching a fever pitch as companies vie to become market leaders, if only on a regional basis. ICOs gaining prominence globally as alternative funding mechanism While some investors and regulators globally continued to view Initial Coin Offerings (ICOs) with some skepticism, the use of ICOs has become more mainstream. A number of startups globally have looked at ICOs as an alternative to traditional funding mechanisms. From a regulatory perspective, ICOs continued to come under some scrutiny, although a number of countries have made efforts to proactively support ICOs, including Japan and Switzerland. Next to IPOs, ICOs are considered to be a much easier means of raising capital. While the use of ICOs is still relatively small, over time if the concept continues to gain momentum, it could have an impact on the VC market. VC investors eying broader blockchain solutions Over the past year, blockchain investments expanded well beyond digital currencies, with numerous investments to support use cases in areas like payments and remittances. While the majority of blockchain investment has occurred in the U.S. and UK to date, investments have been growing in other jurisdictions. In Q1'18, secure hardware wallet-maker Ledger closed a $77 million Series B in France. 9 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. During Q1'18, there was a significant increase in discussions, particularly among corporates, as to the ability to use blockchain technologies in both supply chain and logistics. For example, some began by using it to increase traceability and ensure products are transported according to regulatory requirements. The market for blockchain is well positioned to continue to mature and expand, with progress beyond use cases expected by the end of 2018. Autotech interest growing globally Autotech continued to be a big investment play globally in Q1'18, particularly for traditional corporates that have recognized they need to transform their business models. Many have made inroads into the transportation services space partnering with or investing with ride- sharing companies. For example, Daimler with Via and GM and Ford with Lyft. The trend of large automakers developing their own VC arms also continued this quarter, with Volvo launching its Volvo Cars Tech Fund2 an in-house VC fund focused on investing in startups able to help the company respond to changes in the auto sector. An automaker alliance including Nissan, Mitsubishi and Renault also announced plans to invest up to $1 billion in mobility startups as part of its Alliance Ventures fund, with $200 million earmarked for investment during the first year3. Trends to watch for globally Over the next quarter, AI will continue to be a hot area to watch in addition to autotech and healthtech. While the U.S. will likely continue to lead VC investment globally, there will likely be an increase in the geographic diversity of VC investments. Global VC market starts year with a bang on the back of $1 billion+ mega-rounds 2 https://www.wired.com/story/volvo-vc-fund-cars-tech-startups/ 3 www.fortune.com/2018/01/10/renault-nissan-mitsubishi-vc-fund-alliance-ventures-auto-tech-startups/ 10 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global venture financing by stage 2010 Q1'18 The global venture landscape still is clearly exhibiting the effects of the massive inflows of capital seen over the past several years. Aggregate VC invested remains remarkably high, exceeding even the prior three huge quarters, while overall volume continues to slide, however slowly. Investors are staying cautious, but still willing to deploy huge sums into what seem to be the best opportunities. In addition, it should be noted that many firms, in order to avoid dilution, essentially must continue to participate in financings of existing portfolio companies. Source: Venture Pulse, Q1'18. Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, April 11, 2018. Note: Refer to the Methodology section on page 103 to understand any possible data discrepancies between this edition and previous editions of Venture Pulse. VC landscape still marked by surplus capital "Overall, we saw a strong start to 2018, with over $49 billion in venture capital invested across 2,661 deals globally. While transaction value remained near record levels, we continue to see a decrease in the number of investments, particularly at early stages. Artificial intelligence and machine learning continued to be a significant focus for venture capital investment in Q1'18, as more companies integrate these enabling technologies into their portfolio of solutions, and investors take note of their disruptive value." Jonathan Lavender Global Chairman, KPMG Enterprise, KPMG International 0 1,000 2,000 3,000 4,000 5,000 6,000 $0 $10 $20 $30 $40 $50 $60 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital invested ($B) # of deals closed Angel/Seed Early VC Later VC 11 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global median deal size ($M) by stage 2010 2018* Global up, flat or down rounds 2010 2018* Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 3/31/18. Data provided by PitchBook, April 11, 2018. Declining volume & large capital flows combine to push medians up across the board 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2012 2014 2016 2018* Up Flat Down $0.5 $0.5 $0.5 $0.5 $0.5 $0.6 $0.7 $1.0 $1.3 $2.5 $2.5 $2.1 $2.3 $2.8 $3.2 $3.6 $4.7 $7.7 $5.5 $6.3 $6.0 $5.9 $8.0 $9.3 $9.5 $10.2 $15.0 2010 2011 2012 2013 2014 2015 2016 2017 2018* Angel/seed Early stage VC Later stage VC "During Q1'18, investors continued to plow massive amounts into later stage deals as evidenced by the over $15.4B invested in Series D or later rounds. Investors remain selective though, competing for the best deals and investing aggressively in the chosen few. As a result, we continue to see high valuations at all stages of investment. " Arik Speier Co-Leader, KPMG Enterprise Innovative Startups Network, KPMG International and Partner, Head of Technology, KPMG in Israel 12 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global median deal size ($M) by series 2010 2018* With late-stage activity remaining more resilient, it is clear that by simple inflation, most of the money still flowing goes into later rounds of financing for more mature companies that are perceived to be safer investments. The rate of inflation at earlier stages, meanwhile, remains more reasonable as investors are shying away from more and more fundings at such a risky level. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 3/31/18. Data provided by PitchBook, April 11, 2018. Late-stage rounds see most dramatic inflation $0.5 $0.5 $0.4 $0.4 $0.5 $0.6 $0.7 $1.0 $1.3 $2.5 $2.8 $2.7 $3.0 $3.5 $4.1 $5.0 $6.0 $8.5 $7.0 $7.2 $7.0 $7.0 $10.0 $12.0 $12.0 $14.6 $16.0 2010 2011 2012 2013 2014 2015 2016 2017 2018* Seed Series A Series B $10.0 $12.0 $11.5 $12.0 $15.1 $19.2 $22.5 $25.0 $31.6 $12.2 $14.9 $16.0 $16.0 $27.4 $35.0 $27.9 $40.0 $50.0 2010 2011 2012 2013 2014 2015 2016 2017 2018* Series C Series D+ 13 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. $36.4 $46.0 $48.8 $52.8 $57.6 $76.0 $80.0 $90.8 $123.0 $66 $83 $91 $98 $150 $185 $170 $269 $255 2010 2011 2012 2013 2014 2015 2016 2017 2018* Series C Series D+ Global median pre-money valuation ($M) by series 2010 2018* The unicorn phenomenon continues to skew even median figures somewhat at the latest of stages when it comes to pre-money valuations. Hence, significant jumps between years can still be observed that seem somewhat erratically optimistic. However, once again it is important to note that by now the inflation has permeated the entire capital stack. The first quarter of 2018 may still be recording an unprecedented high it is equally important to note that as the year progresses, that figure could revert downward somewhat, normalizing to very high yet not quite as record-setting levels. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 3/31/18. Data provided by PitchBook, April 11, 2018. As more late-stage data is recorded, 2018 figures could normalize somewhat $2.8 $3.3 $3.0 $3.2 $3.4 $4.0 $4.5 $5.2 $6.3 $6.1 $6.9 $7.8 $8.5 $10.8 $12.7 $14.0 $15.9 $20.3 $19.0 $20.4 $20.9 $24.8 $31.0 $38.8 $37.0 $42.0 $50.0 2010 2011 2012 2013 2014 2015 2016 2017 2018* Seed Series A Series B 14 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global deal share by series 2012 2018*, number of closed deals Global deal share by series 2012 2018*, VC invested ($B) Thus far, the aggregate decline in the volume of angel and seed activity recorded since 2015 has very roughly approximated the robust rise recorded between the depths of the financial crisis and that same peak. Consequently, it seems safest to conclude that the decline is cyclical, a rational response to rising prices at such a risky stage. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 3/31/18. Data provided by PitchBook, April 11, 2018. The early-stage decline seems mostly cyclical 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2012 2013 2014 2015 2016 2017 2018* Series D+ Series C Series B Series A Angel/seed $0 $20 $40 $60 $80 $100 $120 $140 2012 2013 2014 2015 2016 2017 2018* Angel/seed Series A Series B Series C Series D+ 15 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global financing trends to VC- backed companies by sector 2013 2018*, number of closed deals Global financing trends to VC-backed companies by sector 2013 2018*, VC invested ($B) Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 3/31/18. Data provided by PitchBook, April 11, 2018. Pharma & biotech volume grows marginally 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 201320142015201620172018*Commercial Services Consumer Goods & Recreation Energy HC Devices & Supplies HC Services & Systems IT Hardware Media Other Pharma & Biotech Software 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 201320142015201620172018* 16 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Financing of VC-backed companies by region 2013 2018*, number of closed deals Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 3/31/18. Data provided by PitchBook, April 11, 2018. Cautious investors return to developed markets 2017* 2016 2015 2014 2013 63.7% 27.2% 9.1% 61.1% 27.4% 11.5% 58.9% 26.3% 14.8% 57.2% 27.6% 15.1% 62.8% 25.4% 11.8% 67.3% 20.7% 12.0% Americas Europe Asia Pacific 2013 2014 2015 2016 2017 2018* 17 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 3/31/18. Data provided by PitchBook, April 11, 2018. Asia still sees robust sums of VC invested 2017* 2016 2015 2014 2013 Financing of VC-backed companies by region 2013 2018*, VC invested ($B) 69.3% 16.4% 14.2% 66.2% 14.7% 19.1% 57.9% 12.8% 29.2% 51.8% 11.2% 37.0% 51.5% 12.5% 36.1% 59.8% 10.5% 29.7% Americas Europe Asia Pacific 2013 2014 2015 2016 2017 2018* 18 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Corporate VC participation in global venture deals 2010 Q1'18 Note: The capital invested is the sum of all the round values in which corporate venture capital investors participated, not the amount that corporate venture capital arms invested themselves. Likewise, the percentage of deals is calculated by taking the number of rounds in which corporate venture firms participated over total deals. Whether by creating official venture investing units or unofficially increasing their participation in financing rounds, corporate entities have become an increasingly important component of the venture ecosystem as backers looking for financial or strategic gain, moving beyond traditional roles such as acquirers or competitors. The trendline of the volume of deals in which they participate only continues to march higher as of late. Granted, in a cautious, high-priced environment, corporates can justify joining in higher-priced rounds and enjoy access to relatively much richer balance sheets, but their evolution into an important supporting player in the global venture landscape is a novel development and sign of the maturation of the VC industry on the whole. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, April 11, 2018. Corporate VC activity remains a key support of overall investment levels 0% 5% 10% 15% 20% 25% $0 $5 $10 $15 $20 $25 $30 $35 $40 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital invested ($B) % of total deal count 19 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global first-time venture financings of companies 2010 2018* When assessing a single quarter's tally of first-time financings relative to past yearly levels, it is critical to keep the long term in mind. The pace of investment in Q1 2018 could be an outlier low, even in the context of the overall steady slide of the past three years; accordingly, 2018 on the whole may not end up as low as this first quarter tally may suggest. That said, the macroeconomic conditions of global markets and economies are not especially auspicious for first-time financings of a very risky nature, given the power of current incumbents and numerous barriers to entry. Additionally, the venture cycle has resulted in very high prices overall, which further discourages initial check-writing. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 3/31/18. Data provided by PitchBook, April 11, 2018. Macroeconomic & cyclical factors continue to drag down first-time financing levels $9 $12 $13 $12 $14 $20 $17 $14 $3 3,786 5,056 5,929 6,670 7,331 6,738 5,363 4,187 635 2010 2011 2012 2013 2014 2015 2016 2017 2018* Capital invested ($B) Deal count 20 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Q1'18 records a historically robust inflow of capital to unicorns both old and new Global unicorn rounds 2010 Q1'18 Note: PitchBook defines a unicorn venture financing as a VC round that generates a post-money valuation of $1 billion or more. These are not necessarily first-time unicorn financing rounds, but also include further rounds raised by existing unicorns that maintain at least that valuation of $1 billion or more. With Q1'18 recording several unicorn financing rounds bolstered by existing unicorns raising significant sums, it must be said, and thereby generating still-massive private valuations the past several quarters are now headed to record the steadiest volume of money still flowing to unicorns since their heyday in 2015 and early 2016. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, April 11, 2018. 0 5 10 15 20 25 30 35 40 45 50 $0 $5 $10 $15 $20 $25 $30 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital invested ($B) # of deals closed 21 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global venture-backed exit activity 2010 Q1'18 Since a peak in the first quarter of 2015, aggregate venture-backed exit volume has slowly declined on the whole, with a few quarterly aberrations. Total exit value, however, has remained historically robust, by and large. The last three quarters of 2017 hovered quite close to $20 billion in aggregate exit value apiece. Multiple factors are suggested to be in play given these results, namely robust M&A appetite, volatility and high valuations in public markets discouraging smaller and encouraging larger businesses to go public and temporal issues relating to the supply of exit-ready venture portfolio companies. This year, especially given a recent uptick in IPO filings by prominent venture-backed businesses, may well prove key in assessing whether the exit cycle still has significant strength left or whether it may decline further. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, April 11, 2018. 2018 will likely prove significant for the exit cycle 0 100 200 300 400 500 600 $0 $10 $20 $30 $40 $50 $60 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Exit value ($B) Exit count 22 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global venture-backed exit activity (#) by type 2010 2018* Global venture-backed exit activity ($B) by type 2010 2018* With companies such as Dropbox and Smartsheet finally filing to go public, 2018 could well see the surge of tech IPOs that was hoped for in 2017. That said, there could also be more exotic forms of liquidity events still enabling others to stay private, such as secondary market transactionse.g. Uber's deal with SoftBankor buyouts by private equity firms, even. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 3/31/18. Data provided by PitchBook, April 11, 2018. Could 2018 see a tech IPO resurgence? 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Strategic Acquisition Buyout IPO $0 $20 $40 $60 $80 $100 $120 $140 Strategic Acquisition Buyout IPO 23 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global venture fundraising 2010 Q1'18 Given the overall venture industry's size, no matter how large of a fund Sequoia Capital may be able to raise, aggregate fundraising volume will be highly temporal and thereby prone to quarterly skewing. That said, the first quarter of 2018 sustained the slump observed in the back half of 2017, further suggesting that the tide may have turned for at least a period when it comes to limited partners' appetite for growing their allocations to VC and they are now looking to maintain. There will likely be a resurgence, of course, when rebalancing comes and a wave of fresh funds are potentially born from investors that are currently demonstrating success, but for now, that is likely a ways off. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, April 11, 2018. Fundraising finally enters a sustained plateau 0 50 100 150 200 250 $0 $5 $10 $15 $20 $25 $30 $35 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital raised ($B) # of funds raised 24 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global venture fundraising (#) by size 2010 2018* The earlier boom in the venture market, as noted in the prior edition of the Venture Pulse, definitely contributed to multiple general partners kicking off their own fundraising efforts, leading to robustness in the center of the market. Now, during an overall lull, that same center of the market is still leading the way in terms of volume, although it should be noted an intriguing yet plausible uptick in sub-$50 million fundraising is also persisting. Global first-time vs. follow-on venture funds (#) 2010 2018* Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 3/31/18. Data provided by PitchBook, April 11, 2018. Early 2018 figures indicate more robustness in the center and low end of the market 0 50 100 150 200 250 300 350 400 450 500 2010 2012 2014 2016 2018* Under $50M $50M-$100M $100M-$250M $250M-$500M $500M-$1B $1B+ 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 201020112012201320142015201620172018*First-time Follow-on 25 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. VC investments on the rise as AI solutions take aim at healthcare Over the last two years, the healthcare industry has become a major proving ground for AI capabilities, with both startups and VC investors recognizing the enormous potential that AI solutions can offer for improving patient care, expanding the reach of services, and reducing healthcare costs. VC investment in AI for healthcare soars Since 2015, VC investment in AI for healthcare has soared, reaching almost $1.3 billion across 103 deals in 2017. Investments continued to increase in Q1'18, with $320 million invested across 18 deals: well on pace to at least match 2017's totals. Given the inefficiencies and high costs associated with healthcare in most regions of the world, it is very likely that funding for AI will only continue to grow. The use of AI and machine learning in healthcare is not a new endeavor. FDA-approved algorithms have been used since as early as 1998 to detect cancers in medical images. The difference today is that new technologies are making such efforts much easier. Use of the cloud and the rapid digitalization of information has improved access to data and the speed of computation. VC investors have seen the concept of AI become mainstream and are investing accordingly. Providing benefits to all stakeholders VC investors are excited about AI solutions because they can help meet a variety of needs for different stakeholders from increasing patients' access to care and improving outcomes, to allowing doctors to be more efficient and improving quality control for health system regulators. VC investors are also interested in the potential of AI to help impact broader health system inefficiencies. For example, life sciences companies could potentially use AI tools to 'fail fast', better identify population subsets where new drugs will do well and find secondary uses for old failed drugs. Such improvements could speedup drug approvals and reduce development costs. AI can also be used to improve supply chain management, disease prevention and support patient monitoring and care of chronic illnesses. Corporates becoming more interested in AI in healthcare Many corporates are just starting to put their toe in the water with respect to making investments in AI, using funding as a means to wrap their heads around how to leverage technologies effectively. Recent acquisitions in the space are likely to spur more corporate and private equity investments in the space. On the not-for-profit side, the ability to make better, data-driven decisions is seen as a major benefit. However, most organizations recognize they will need to change their business models in order to get the most value from AI innovation. The challenge is that regulations are still somewhat behind so corporates do not want to get too far ahead of themselves. In the interim, not-for-profits in the space are still looking at making VC investments, building for-profit arms, and monetizing their data. 26 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. VC investments on the rise as AI solutions take aim at healthcare, cont'd. Data critical to AI value Access to data is one of the critical enablers of the successful use of AI in healthcare. The advent of technologies like wearables that can provide constant streams of data and the development of analytics tools to manage and analyze available data quickly will continue to underpin the successful use of AI. Similar to other areas where AI is seen as a backbone for transformation such as autonomous driving without access to the right data at scale, AI may not be able to live up to its potential. Trends to watch for related to AI in healthcare Over the next few quarters, investments in AI for healthcare will likely focus primarily on improving back-end efficiencies, such as the use of RPA to support care, or the use of AI to process claims. In the short term, it is unlikely that AI investments will focus on direct patient diagnosis, but rather on ways of using AI to provide routine second opinions or to detect errors. While the majority of VC investments related to AI in healthcare have occurred in the U.S., there is likely to be increasing investment in other regions as investment in the space continues to heat up. While AI has the potential to reduce costs and improve quality in developed countries, it also has the potential to help address issues in developing regions with infrastructure deficiencies or scarce resources. China, in particular, is expected to see major investments in the near-term. 27 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global venture financing of artificial intelligence (AI) & machine learning (ML) companies in healthcare 2010 Q1'18 Artificial intelligence (AI) and machine learning (ML) are often conflated; in essence, artificial intelligence can be understood as the overall field of computer science while machine learning is a subset. Investment within AI and ML applications in healthcare have exploded as of late, mainly as the enormous potential for accurate automation of tasks as routine as, say, radiology readings is fairly obvious. The key challenge is the degree of accuracy, as in the field of healthcare the rewards are enormous if one can automate analytics and disintermediate the complex chain of value, but given that human health and lives are at risk, predictions must be absolutely airtight. Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, April 11, 2018. A recent, exponential rise $0.1 $0.1 $0.2 $0.1 $0.7 $1.2 $0.3 9 8 15 28 30 49 65 103 18 2010 2011 2012 2013 2014 2015 2016 2017 2018* Capital invested ($B) # of deals closed "For AI in healthtech to achieve its full potential, there needs to be a much broader understanding of the value of AI across healthcare workflows and the ability of AI to supplement existing processes. While this will take time due to some fundamental inertia of healthcare, the application of AI in healthtech will lead to an entirely new paradigm for providing tech-driven healthcare" Bharat R. Rao, Ph.D. National Leader, Data & Analytics for Healthcare & Life Sciences, KPMG in the U.S. 28 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Top 10 global financings in Q1'18 Grab $2,500M, Singapore Transportation Series G Lyft $1,700M, San Francisco, CA Transportation Series H Faraday Future $1,500M, Los Angeles, CA Automotive Early-stage VC GO-JEK $1,500M, Jakarta, Indonesia E-commerce Series E Uber $1,250M, San Francisco, CA Transportation Late-stage VC 7 8 6 9 10 5 4 3 2 1 Magic Leap $963M, Plantation, FL Augmented reality Series D Ofo $866M, Beijing, China Transportation Late-stage VC Katerra $865M, Menlo Park, CA Business software Series D Chehaoduo $818M, Beijing, China E-commerce Series C Douyu $632M, Wuhan, China Entertainment software Corporate Q1'18 top deals dominated by transportation Source: Venture Pulse, Q1'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, April 11, 2018. 10 3 6 4 9 7 8 5 2 1 In Q1'18 VC-backed companies in the A $29.4B mericas raised across 1,782 deals 30 #Q1VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. VC investment in the Americas held strong in Q1'18. While the U.S. accounted for the vast majority of VC investment in the region, Latin America particularly Brazil saw some exciting funding and exit activity. U.S. remains VC leader, but market in Americas becoming more diversified The U.S. continued to attract the majority of VC funding in the Americas. While the Bay Area was the primary draw, other U.S. cities like Boston, San Diego, Austin, Philadelphia and New York have also been able to attract significant investments in recent quarters. In Latin America, Mexico, Brazil and, most recently, Argentina have moved to support VC investment. In 2017, Argentina introduced a new entrepreneurship law aimed at making it easier for startups to do business by reducing red tape and providing easier access to capital. Exemption from U.S. tariffs positive for Canada and Mexico There continued to be uncertainty related to U.S. trade policies in the Americas during Q1'18, with the results of NAFTA renegotiations between the U.S., Canada and Mexico remaining a big question mark. The exclusion of both countries from global trade tariffs announced by the U.S. in Q1'18, however, was viewed as a positive sign by investors with most taking a 'business as usual' approach to their activities. Solid start for 2018 VC market in Canada Canada experienced a strong start to 2018, with a $223 million raise by biofuels producer Enerkam and a $49 million raise by story-sharing platform Wattpad early in the quarter. China-based Tencent Holdings was the primary funder of the Wattpad deal enhancing its interest in Canada; in 2017, Tencent made a strong investment in Canada's Element AI. Other Chinese VC investors have also taken note of Canada's attractiveness with AI, biotech, and clean energy all seen as targets for investors. In Q1'18, the Canadian government's $1.2 billion Venture Capital Catalyst Initiative was rolled out. It is expected th

Aggregate venture capital (VC) invested soars past $45 billion for the fourth quarter in a row. Not so long ago, it was considered remarkable that VC invested worldwide flirted briefly with $50 billion in two given quarters, Q3’15 and Q2’16. But now, for the fourth consecutive quarter, VC invested has exceeded $45 billion, and in the most recent quarter, just barely fallen shy of $50 billion once more.

About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.

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