SAN FRANCISCO, United States — Venture capitalists poured $15 billion into startups in the third quarter, putting this year on pace to be the third largest ever for investment activity, according to a report released on Thursday.
So far this year, venture-backed companies have raised $56 billion across nearly 6,000 funding deals, according to a report from venture capital database PitchBook Data Inc and the National Venture Capital Association. At that pace, venture investment is projected to hit $74 billion by year's end, falling short only of the investment levels in 2000 and 2014.
The data shows that despite long-held fears of a contraction in venture capital that would force startups out of business, investors continue to enthusiastically back promising technology companies.
"The rounds keep getting bigger," said Adley Bowden, vice president of analysis for PitchBook. "As valuations go up and (venture) firms are trying to get a certain ownership percentage, the check size goes up as well."
Late-stage venture rounds have spiked most significantly, with the median round size at about $10 million, up from a little more than $6 million in 2013.
"The Airbnbs and the established unicorns ... are not having trouble raising capital and very large rounds," Bowden said.
Mutual funds, hedge funds and sovereign wealth funds — contrary to widely held expectations that they would flee venture capital amid the slowing IPO market — continue to invest heavily in "unicorns," the term for venture-backed companies valued at $1 billion or more. Uber Technologies Inc, for instance, raised $3.5 billion from Saudi Arabia's sovereign wealth fund in June.
Unicorns appear to be gobbling up most of the venture capital, with angel and seed financing falling about 18 percent to $1.7 billion in the third quarter compared with a year ago, the result of more accelerators such as Y Combinator replacing seed investors as startups' first stop for cash, the report shows.
Venture capitalists appear to be spending money as fast as they are raising it. Firms have raised $32 billion so far this year, compared with $36 billion for all of last year.
Although money continues to flow into technology companies, little is flowing back to venture capital firms. The report takes a dour view on the IPO market, saying the "slump is unlikely to reverse." The third quarter saw 162 exits —IPOs and M&A deals — compared with 237 a year ago.
"A lot of unrealised gains are in the venture funds right now," Bowden said.
By Heather Somerville; editor: Leslie Adler.