Venture investment topped $57 billion in the first half of this year — and the money will probably keep on flowing

Travis VanderZanden

The amount of money flowing into venture-backed companies jumped to $57.5 billion in the first half of this year — up 50% from the same period a year earlier, according to a new report from PitchBook and the National Venture Capital Association.
The lion's share of the dollars flowed into software companies and those based on the West Coast.
Much of the boom is coming from nontraditional venture investors, such as private equity firms.

For entrepreneurs looking to raise money for their tech startups, this year has been the best of times.

Venture capital-backed firms raised a whopping $57.5 billion in the six months ended June 30, according to a new report from Pitchbook and the National Venture Capital Association. To put that in perspective, that's more than was invested in such firms in any full year between 2008 and 2013, and it's 50% more than was invested in the first half of last year.

"For an industry that has been characterized by capital availability over recent years, the first half of 2018 has only exacerbated feelings of excess," Pitchbook and the NVCA said in the report. The report continued: "To say capital availability is high would be putting the true state of the US VC industry lightly."

But if you wanted to get some of that cool venture cash, your best bet was to be in the software business – and to be located on the West Coast. Software startups raked in $23.7 billion in venture investments in the first half of this year. That's about 41% of the total, and about even with the same period last year. They also accounted for about 42% of all venture deals in the first six months of this year.

Some 62% of all the venture capital money invested — and 40% of the deals — in the most recent period went to West Coast based startups. In the same period last year, startups based in San Francisco, Seattle and other West Coast locations accounted for 55% of the money invested and 41% of the deals.

Overall, the number of venture investments ticked up only slightly, from 3,917 in the first half of 2017 to 3,997 this year. But the size of those deals swelled. For example, the median seed-stage investment jumped from $1.6 million in the first half of last year to $2.1 million this year. Meanwhile, the median amount invested in Series B round jumped to $29.3 million from $24.3 million for all of last year.

Interestingly, much of the money flowing into venture-backed startups isn't coming from traditional venture capital firms. In fact, about 63% of the total dollars invested in the first quarter came from private equity and other nontraditional sources.

And it looks like the good times will continue to roll. Venture capitalists raised $20.2 billion in the first half of the year, up from $19.1 billion in the same period last year, putting the industry on track to top $30 billion in funds raised for the fifth year in a row.

"We don’t believe that current trends will subside in the near term," PitchBook and the NVCA said in the report.

The new funds flowing in are "adding dry powder to a market already awash with capital," they continued.

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