This article by Urvaksh Karkaria at the Atlanta Business Chronicle describes venture funding in Georgia companies. Military entrepreneurs should check similar data in your locale. As we discuss in class, Entrepreneurship For Transitioning Warriors, finding funding and raising capital is one of many factors that must be understood. The availability of venture capital in your business idea may be key to launching your business.
Karkaria writes---Venture dollars invested in Georgia companies in the first quarter of 2018 were the lowest since the January-March quarter of 2009.
Georgia companies raised $27.22 million in venture capital in the first quarter, down 63 percent from $73.37 million in Q1 2017, according to the MoneyTree Report published by PricewaterhouseCoopers LLP and CB Insights. The number of Georgia deals in the quarter fell to 13 in Q1 from 15 at the same time last year.
The Georgia performance in Q1 is “perplexing” and bucks national venture investing trends, noted John Nee, partner in PwC’s Atlanta technology practice. Nationally, venture capital investing in the first quarter was the third-highest since 2002.
“We are late in an economic cycle, so we see angels and other investors pulling back their investments,” noted Mark Buffington, CEO of Atlanta venture capital firm BIP Capital.
Nationwide, venture firms invested $21.1 billion across 1,206 deals in the first quarter, according to the MoneyTree Report. That compares with $15.16 billion raised across 1,371 deals at the same time a year ago.
A high number of mega-rounds contributed to the funding growth this quarter, which was the second-consecutive quarter with more than 30 rounds of $100 million or more. The first quarter saw 34 mega-rounds to U.S. venture capital-backed companies, which accounted for 34 percent of total funding, but down from 42 percent in Q4 ‘17. This marks the first decline since Q4 2016, according to MoneyTree.
“The $21 billion we saw invested this quarter is a record high, just the second time we’ve reached this funding level during the last 15 years,” Tom Ciccolella, PwC’s U.S. venture capital leader, said in a statement.
A proliferation of growth equity capital is driving valuations higher in later-stage, successful companies. Meanwhile, angel investors are exercising caution in exposing capital, Buffington said.
“We are seeing mega funds make really big bets in sectors where they have developed an investment thesis and where they can execute a roll-up of disparate companies in that space,” he said. “We are also seeing a little caution amongst angels and early stage investors. That is an interesting dichotomy.”
The M&A (mergers and acquisitions) market is expected to remain active and upward pressure on valuations for high growth venture companies will continue, given the fresh interest that growth equity and buyout funds have raised, the venture capitalist said.
“One thing is certain — a correction will eventually come and great companies will endure regardless of the macro-economic backdrop,” Buffington said.
Georgia ranked No. 27 of 44 states in venture capital raised in the first quarter. The average check size in Q1 was $2.1 million, compared with $4.9 million at the same time last year.
Expansion-stage companies drew the most venture dollars in the first quarter, with four deals accounting for $14.86 million, according to MoneyTree. Internet companies accounted for the largest share of venture capital investment — $22.54 million across nine deals.