US startups have raised 10x more from VCs than IPOs in 2018

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Venture firms have poured $84 billion into US companies so far this year, according to a new report from PitchBook and the National Venture Capital Association. Annual VC funding has already reached the highest level in over 10 years, with one quarter left to go.

That is over 10x more capital than the $7.9 billion raised by 56 US VC-backed companies through the 3Q18, according to Renaissance Capital data. In fact, the $84 billion invested by venture firms exceeds the combined market caps of US-based companies IPO'ing with VC backers ($54 billion). Of course, IPOs are not the only exit - acquisitions typically account for 40-60% of VC exits.

On the private side, deals have also gotten bigger. Over 50% of venture deals raised at least $50 million, the highest in a decade. Unicorns new and old raised record VC capital in 2018, with 80 deals raising $19.2 billion.  Through the third quarter of this year, 12 US startups had gone public with $1+ billion valuations.

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What does this mean for the IPO market? Now that almost every company files confidentially, investors have less visibility than ever into upcoming IPO activity. The record VC capital raised by startups this year, particularly from late-stage rounds, should translate into a strong supply of IPOs in the next few years.

The report concludes that, "Despite the welcome re-opening of the venture-backed IPO market, it is fair to say that it should in fact be much more robust." That rings true, based on the enormous number of private unicorns and the relatively few that are actually going public. However, as we stated in our 3Q Review , next year may finally provide a commensurate level of exits for VCs, with mega IPOs like Uber, Lyft, Slack and Stripe reportedly targeting 2019.

Including foreign companies, there have been 70 US IPOs with VC backing so far this year. To screen for VC-backed IPOs, PE-backed IPOs, or find IPOs by industry, underwriter, location, auditor or legal counsel, sign up for a free 7-day trial of IPO Pro .

The article US startups have raised 10x more from VCs than IPOs in 2018 originally appeared on IPO investment manager Renaissance Capital's web site renaissancecapital.com.

Investment Disclosure: The information and opinions expressed herein were prepared by Renaissance Capital's research analysts and do not constitute an offer to buy or sell any security. Renaissance Capital's Renaissance IPO ETF (symbol: IPO) , Renaissance International ETF (symbol: IPOS) , or separately managed institutional accounts may have investments in securities of companies mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: News Headlines , IPOs

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