The volume of venture capital deals has reached an all-time high, but the value of those deals has slowed worldwide due to continued declines in the Chinese market.
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This could be the start of a trend as projections indicate declines in early-stage deal volume, which may foretell problems for later-stage investors years down the road, according to a report from Crunchbase.
A projected $75.6 billion was invested across 9,100 venture capital deals in the third quarter of 2019. The growth was mostly due to a large upturn in seed-stage deals, as well as ongoing development and maturation of international startup markets.
This seed-stage activity could lead to worldwide venture deal volume hitting new post-Dot Com heights.
Venture dollar volume has been primarily driven by very large, very late-stage rounds, and it remains below the all-time high of a projected $87.4 billion in the second quarter of 2018. Since then, it has flattened out over the past several quarters as unicorns have increasingly looked to public markets.
The principal driver of this trend is the ongoing decline of China’s venture capital market, mirroring deteriorating economic conditions in that country. Regardless of the cause, the United States and Canada are taking on a greater share of global venture dollars, even as their deal share slips.
North American startups raised 47.8% of worldwide venture dollar volume in the third quarter of 2019, up significantly from the 43% proportional share U.S. and Canadian startups called down a year ago.
This is in contrast to the fact that deal volume is growing faster outside North America. In the third quarter of 2019, U.S. and Canadian companies netted 39.2% of venture deal volume across all stages, down from. 43% in last year’s third quarter.
%Including Series A and Series B rounds - plus transactions from a selection of other round types - the global venture market can attribute roughly 28.3% of its deal volume and roughly 36.8% of dollar volume to early-stage startups.
Seed-stage startups were strong, with deals up 18.5% since last quarter and 17.6% since the third quarter of 2018. Dollar volume is up by similarly growing by 24.2% quarter-over-quarter and 7.7% year-over-year. For early-stage investors worried about issues with future deal-flows, this growth should be encouraging.
On the one hand, angel and seed-stage deals are a big part of the global venture landscape, accounting for nearly 65% of deal volume, however, because these deals are quite small - typically less than $5 million, they accounted for just 5.9% of total venture dollar volume — a virtual rounding error when it comes to that metric.
Angel and seed-stage venture exhibits the pattern of geographic divergence that’s present in the market as a whole. U.S. and Canadian startups accounted for 43% of worldwide angel and seed-stage dollar volume in 2019’s third quarter, which is up from 34.7% of global totals from a year ago.