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KPMG: VC investment in Aussie startups hit a record high of US$899 million in 2018

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Venture capital (VC) invested in Australia hit a record US$899 mil in 2018, up from US$659.9 mil in 2017, according to Venture Pulse Q4 2018, the quarterly global VC trends report published by KPMG.

Over the last quarter of 2018, US$147.1 mil of startup investment was recorded in Australia. Major funding deals included Deputy’s US$81 mil Series B round, Nura’s US$21 mil Series A round and Gilmour Space Technologies US$13.9 mil Series B. The number of deals, at 15, was down from the last quarter (41), when investment totaled US$325.16 mil.

Amanda Price, Head of KPMG High Growth Ventures commented: “2018 was the biggest year ever for VC investment into Australian startups. For the first time we are starting to see a steady flow of major funding rounds over US$10 mil aimed at helping locally founded businesses take on global markets. In Australia the diversity of the startups being funded is testament to the scale of the economy and opportunity.

However we need to view this growth in the global context, with global VC investment hitting $255 billion in the same period. In 2019 we expect a pricey climate and volatile market environment which will lead to increasing caution on the part of investors, even though there remains record capital to deploy,” she said.

Global trends

Overall, the final quarter of 2018 saw nearly US$64 bil* in VC investment globally, led by a $12.8 bil funding round to US-based e-cigarette manufacturer Juul. The VC deal, second only to the $14 bil raised by China’s Ant Financial in Q2’18, helped propel annual VC investment globally from $175 bil in 2017 to a massive $255 bil in 2018, according to the Q4’18 edition of the KPMG Enterprise Venture Pulse report.

2018 Annual Highlights

  • Every series achieved a new high in median pre-money valuations in 2018, from a staggering $375 mil for Series D or later rounds, to $6.7 mil at the seed stage.
  • The global median Series A financing was $7.5 mil in size in 2018, far outstripping any prior year.
  • Global median pre-money valuations rose across all deal stages in 2018, including a staggering $375 mil for Series D or later rounds, and $6.7 mil for seed stage rounds.
  • The global median Series A financing rose dramatically in 2018, reaching $7.5 mil.
  • VC investment in urban mobility skyrocketed from $26 bil in 2017 to close to $45 bil in 2018.
  • VC investment in artificial intelligence related to healthcare almost doubled, from $1.25 bil in 2017 to $2.34 bil in 2018.
  • Agtech continued to rise on the radar of VC investors, with total global investment growing from $1.93 bil in 2017 to $2.15 bil in 2018.

Asia shatters record for annual VC funding, in part due to Q2 raise by Ant Financial

Asia-based VC investment reached a massive annual high of $93.5 bil during 2018 – up from $65.2 bil in 2017. This increase was driven in no small part by Ant Financial’s $14 bil raise in Q2’18. While VC investment in Asia fell from $17.6 bil in Q3’18 to $15 bil in Q4’18, the results remained relatively strong outside of outlier Q2’18. VC investment this quarter in Asia was dominated by massive deals, including $1 bil+ deals to ByteDance, Grab, Tokopedia and Swiggy.

Quarterly volume declined to close the year, but volume remained more than healthy on a historical basis, roughly in line with the level seen in 2014; large late-stage deals, meanwhile, propelled 2018 VC invested to a record high of $93.5 bil in Asia-Pacific

Future less certain heading into 2019

Given the extraordinarily strong year for VC investment in the US, Asia and Europe, including the two largest VC deals in history, the total level of investment in 2019 will be tough to match. However, there will likely continue to be substantial VC investment globally, particularly in late-stage deals.  Autotech – whether autonomous vehicles, alternative energy vehicles, or ride hailing – is expected to see strong investment, in addition to healthtech and fintech. On the technology front, artificial intelligence is also expected to see strong growth.

The IPO market will be one area to watch as several massive unicorns, including Uber and Lyft, prepare for IPOs despite the unexpected turbulence in the capital markets at the end of 2018.

“In 2018, we saw the IPO door swing wide open globally with a number of significant IPOs across the world,” said Arik Speier, Head of Technology, KPMG Somekh Chaikin in Israel. “While the last month of 2018 was highly tumultuous for the capital markets, if it settles down quickly in Q1’19, we may see a number of the aging unicorns looking to exit. If those companies do well, others will follow.”

*All figures are in US dollars.

*Note: all figures cited are in USD, data for the report provided by PitchBook

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