But instead of leading her pitch to limited partners (LPs) with a reference to gender, she phrases the investment thesis as follows: “We’re going to invest in an underlooked asset class that is overperforming.” 

“If it’s just about [investing] in more female founders, everyone has a different motivation,” Neundorfer said. “We don’t want this to be seen as a nonprofit charity; that’s not what it is.” 

As Neundorfer works to raise $20 million for her next fund, there’s a greater trend in her favor: according to Crunchbase data, over $20 billion has been invested in female-founded and co-founded startups so far in 2019.��

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Of that $20 billion, approximately $5 billion has been invested in female-only founded startups. The remaining $15 billion, according to Crunchbase data, went to startups with female and male co-founders.

The year-to-date numbers put 2019 on track to be the second-best year for dollars invested into startups with a female founder and co-founder, excluding the $14 billion outsized round in 2018 into female-founded Ant Financial.

Neundorfer, like many partners of micro-firms investing in smart women founders, is looking to bet on the next , , or . That in mind, let’s start with the billion-dollar ideas that happened to be led by female founders this past quarter.

Supergiant Rounds

So far this year 44 supergiant rounds (those of $100 million or more) have gone to female-founded and co-founded companies. That adds up to 11 percent of dollars invested in rounds over $100 million in the quarter.��

Here’s a look at some of the companies that made up those millions:

• started in Kenya as a financial services startup to help individuals who are underbanked safely save, borrow, and grow money. The company raised a $110 million Series D round in August, as reported by .����

• and helped start , which connects students around the world to teachers in North America for English lessons. It raised in September, bringing its total known funding .��
• started in Vonore, Tennessee to make biomass supply solutions for bio-based products. for her compostable products made from agricultural materials in July. (The company has .)

Tala was started in 2013; VIPKID began in 2013, and Tiller kicked off Green Energy in 2008. It’s a reminder that not everyone is Brex, and some supergiant rounds take time to secure.

, a female-led company valued at $1.2 billion dollars, is another example of how long it takes to raise nine-figures. Founder told Crunchbase News that when her company was founded five years ago, “beauty wasn’t a category that many [venture] firms were interested in exploring.” Then 2018 came, and it “was a record year for venture funding in the beauty industry.”

She added: “I imagine 2019 might break that record again. Beauty, commerce, conversation, and community are all rapidly moving online, and it’s clear that investors are waking up to the opportunity this creates for a digital-first and customer-centric company like Glossier.” 

But before became a unicorn, valued at over $1 billion dollars, it had to convince investors it was a valuable bet. To do so, it had to raise smaller rounds when it wasn’t a household (or dorm room) name. So let’s unpack the trends around Series A rounds, or the first institutional round of funding a startup can raise.����

Notable Series A Rounds

Female founded and co-founded companies took home 16 percent of Series A dollars invested in 2019.��

One Series A round that stood out in Q3 2019 was , a marketplace for hospitals to hire qualified nurses with a more efficient matching process. CEO and Co-founder raised round led by . Another was , which helps engineers debug their code. It led by in September. The company is co-founded by CEO and CTO .��

Large Series B Rounds

Looking one step further on the venture maturity chart, female-founded and co-founded companies took home 16 percent of Series B dollars invested in 2019.��

A Series B company to watch is , a biotech startup that develops therapeutics for diseases with no current treatment options. CEO and founder raised t. Another was , a personal assistant app that helps sales teams. It was co-founded by its CEO, . Vymo’s origins are in India, but it is now setting up offices in New York as well. The company raised led by in July. According to the company, it has 100,000 salespeople at over 50 global enterprises and counting using their mobile app.��

For , Managing Director and Head of Funds at speaking at the Disrupt Women’s Breakfast, more women in venture would create a domino effect. Currently, around 11 percent of VCs with check-writing ability are women, up from nine percent a couple of years back. Of the 130 active companies in Comcast’s portfolio, 26 percent have a female co-founder.��

Overall 13 percent Of Invested Dollars Go To Female-founded And Co-Founded Companies

In 2019 through Q3, 13 percent of invested venture capital dollars went to female co-founded startups, up from 10 percent in 2014. The figure, however, is below 2018’s 17 percent.

In 2019 to date, $87 dollars go to male-only founded teams for every $100 invested by VCs. Female-only founded teams are therefore only raising $3 dollars for every hundred dollars spent. Male and female co-founded companies raised $10 dollars for every hundred dollars spent.��

While there are more female-founded and co-founded unicorns than ever before, and therefore proof that there’s a business in investing in diverse founders, global data doesn’t yet live up to this trend.��

So far, 2019’s global deal volume for female-founded and co-founded teams is stable at 19 percent, staying within a 2 percent range from 17 to 19 percent over the last few years.

To Close

So let’s dial back to where we began: a micro-fund that wants to invest in female founders working on ideas with the potential for impressive returns.��

While the data doesn’t quite reflect the sort of proportional change we expect — yet — seeds are being planted in a time where we see billion-dollar companies led by women founders. Perhaps in time, the market will catch up to the data that proves it’s worth investing in “an underlooked asset class that is overperforming.”

Methodology: Notes On The Data

The charts and information in this report are based on reported data in Crunchbase. In other words, it’s based on publicly disclosed rounds included in Crunchbase dataset.

For this quarterly report, our analysis is based on announced funding to companies with founders associated. This is in contrast to our overall venture capital report where we use projected data in order to correct for data lags for the most recent quarter. Over time we fully expect more founders to be added to Crunchbase, as well as a reporting lag on funding which will be greater for the most recent quarter. For this report we include private company fundings from seed through to late stage venture. We exclude private equity rounds.��

Crunchbase’s dataset is constantly expanding, but there are gaps. A company may not have founders listed on its Crunchbase profile. Or Crunchbase might not have a gender listed for founders that are attached to the person’s Crunchbase profile. (Note: In addition to “male” and “female,” Crunchbase has over two dozen other gender tags.) Based on an analysis of current data for this report, more than 80 percent of dollars raised in the last five years are associated with companies that have founders.

Crunchbase, like all databases of private-market transactions, has a documented pattern of reporting delays. It can sometimes take between weeks to months for some rounds to be announced publicly and subsequently get added to Crunchbase. This is especially the case for seed and early-stage deals, which are often raised by companies before the company launches a product, or otherwise gets much outside media coverage which surfaces information about the company’s funding history. As data is added to Crunchbase over time, some of the numbers in this report may shift slightly.

Seed includes angel, pre-seed, seed, equity crowdfunding, and venture series unknown below $1 million. Venture rounds includes early and late stage venture, and corporate venture. We exclude private equity rounds from this report.����

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All the great news, though, comes off a pretty unimpressive third quarter not just for Austin, but for Texas as a whole.

As is typically the case, Austin funding amounted to more than the other major cities, representing 63.5 percent, or nearly two-thirds, of what was raised statewide. But numbers overall were less than impressive.

Texas dollar values were down significantly at $372.4 million (52 percent year-over-year) compared to $776.8 million in Q3 2018 and even lower (55 percent) than the $830.6 million brought in by Texas startups in Q2 2019, according to Crunchbase data.

For context, Austin startups raised more last week than Texas companies combined raised in all of the third quarter alone, according to Crunchbase data.

But it’s important to remember that final numbers are all subject to reporting delays. Actual deal counts and dollar volume totals are higher than what Crunchbase currently has on record, and the numbers we’re reporting today are likely to change as more data gets added to Crunchbase over time

Or, perhaps everyone was just busy working on all the deals that seem to be materializing so far in the fourth quarter.

Regional Breakdown

Going local, venture capitalists put $236.4 million into Austin startups across 31 deals in the third quarter—a 46.9 percent drop (in dollars) compared to the $445.5 million raised over 40 deals in the year’s first quarter, according to Crunchbase data.

Austin’s largest known deal in the quarter was fintech startup s $60 million raise (which we covered here), which accounted for more than a quarter of all dollars raised. Meanwhile, , which markets and manages vacation rental homes, landed a $48 million led by Menlo Park-based . While those are respectable rounds, it’s an overall disappointing result when you considered the city started off the year with a very strong January.

Dallas’ performance in the quarter also reflected a decline when compared to the three-month period that preceded it. In Q3, Dallas startups brought in $70.3 million across nine transactions compared to $126.7 million in 15 deals in Q2. The company that raised the most in Dallas during the third quarter was five-year-old biotech startup , which brought in $23.7 million in a led by Los Angeles-based .

Houston’s totals were pretty low even by Houston standards (the city often ranks third in the state in terms of venture dollars raised). Startups there raised a mere $38.4 million in six deals in the three months between June and September 2019, down considerably from the $251 million by 13 companies raised in Q2 2019. The company that brought the most venture funds in Houston during the third quarter was , a four-year-old commercial provider of human spaceflight services, which raised $16 million in .

Some Perspective

Before I could get too negative about the results, , CEO of Austin-based , helped put things in perspective for me.

“We’re still a relatively small venture funding market, relatively being the key word there. So one or two events can make it look like a major percentage change when, by comparison, those few events could be common in larger venture markets where their happening is a mere blip from the norm,” he said.

Also, I was quick to say, “Oh wow, another quarter where Austin performs better than the rest of Texas.”

But he reminded me that what’s good for one city here is good for the rest of the state too, especially to those cities that aren’t so far away (San Antonio and Houston are about 90 minutes, and 3 hours driving distance away, respectively)

“Folks are really coming together and recognizing that there’s domain expertise in each of the cities that can be leveraged,” he said. “Startups take at least three to four years to get meaningful traction for investors. Austin started seeing significant momentum six or seven years ago, and we’re now seeing the fruits of that. The other markets here started a couple of years behind Austin. So in a few years, I expect we’ll be seeing the same trends in other cities.”

But something that strikes O’Brien as needing some improvement is the fact that despite a lot of money residing in Texas (think high net worth individuals and family offices for example), a lot of the larger deals are being funded by VC firms located outside the state.

Cases in point: Silicon Valley-based led Austin-based s massive $300 million Series C last week, which also included participation from UK-based Baillie Gifford. out of Santa Monica, Calif. led ’s $100 million Series C, which also included participation from Singapore’s.

“Everyone else is pouring capital into the state so why not the people here,” O’Brien asked. “Those deals are a strong signal that folks in our home state should be supporting the state much more aggressively.”

O’Brien challenges the wealthy individuals in the state to appreciate the expertise located here.

“They can no longer wait on the sidelines,” he said. “They need to put capital to work here.”

One example of an out-of-state investor who sees the potential in Texas is , a partner with Princeton, NJ-based growth equity firm , which has invested in Irving-based . She is bullish on the state and believes part of what makes Texas attractive is how affordable it is for startups to operate.

“There’s a business-friendly, economically-healthy climate across all major cities and surrounding areas. The unemployment rate is below the national average and companies enjoy low to zero business tax rates,” she told Crunchbase News. “Strong corporate presence from the sectors in which we invest is another reason that Texas appeals to us.”

Indeed, a number of large tech employers such as AT&T, Amazon, Dell, IBM, Apple, Lockheed Martin, 3M, and Hewlett-Packard have a significant presence in Texas, Ford said.

“We also see quality of life is creating a boomerang effect from the coasts where Generation Xers are coming home to start and grow interesting tech businesses,” she added. Meanwhile, personal income is growing in a state where there is no personal income tax.

“These dynamics serve founders well, and are strengthening their ability to recruit from outside the region,” Ford said. “We have also discovered that many founders in the region are wired to be more capital-responsible than in major markets like the Bay Area and NYC. They are not keeping up with the Joneses of Silicon Valley, always focused on raising that next round. They’re focused on capital efficiency, have a more measured mindset in the interest of building solid, scalable businesses.”

And, as O’Brien pointed out, there is capital available in Texas in the form of family offices, high net worth individuals, angel and seed investors.

“So Texas is not ‘underserved’ as many markets are in the middle of the country. Raising $5M or less is relatively easy,” Ford said. “But we hear from entrepreneurs that it is more challenging to find the right investment partner with the right check size, say $8-15 million, and know-how once they reach the growth stage – when they are no longer testing and working on product-market fit, but rather truly ready to scale growth.”

Note: Due to the quarterly, I will not be publishing my monthly Texas-focused column in October. But it will be back in full force next month.

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The Crunchbase News team is hard at work with our Q3 2019 venture capital report (you can keep tabs here if you’d like), parts of which we’ve already published, including our looks at the global venture market, and the combined American and Canadian market.

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The data is largely positive. Some figures (like global venture dollar volume) were down when compared to their year-ago results, but there’s plenty of strength to be found in the results. Let’s highlight some high-and-low-lights as we head into the fourth quarter of 2019, and, soon, 2020.

Notable Results

Re-reading the data this morning, I noticed that there was something interesting happening with seed-stage investing, early-stage investing, and late-stage investing. So, it makes sense to quickly touch on each of the three main stages, emphasizing what was eye-catching from each tranche of the global venture market.

We’ll relate our global notes to what happened closer to home at the end. That said, let’s examine each stage, starting with the earliest:

• Seed: As our own wrote, Q3 2019 “brought a veritable explosion in angel and seed-stage dealing,” including a projected $4.44 billion in capital invested at the stage across just under 6,000 rounds. That second tally works out to nearly two-thirds of all rounds in the quarter. Despite risk warnings flaring up around the world (politics, trade, economic data, etc.), the global Seed market appears to be in a risk-on position. That’s to say that even this late in the current global expansion, there’s plenty of optimism for early-stage, high-growth private companies that will take years to mature and produce returns.
• Early Stage: If Seed had a great quarter in terms of deal volume, early-stage investing had the opposite. Early-stage deal volume, according to our global report, “declined quarter-over-quarter and year-over-year” while dollars invested in the space rose over both time frames. So, we’re seeing more large early-stage deals but fewer of them. This trend contrasts with Seed’s Q3, which saw deal volume growth. If the two patterns hold, for reference, we could see a number of Seed-stage companies hoping to raise a Series A or Series B round (the two main investments that comprise the early-stage market) fail to do so in the future.
• Late Stage: In contrast to the early-stage market, late-stage investing grew in Q3, according to Crunchbase projections, by putting up more deal and dollar volume than it did a year ago. Q3 2019’s late-stage result is dwarfed by Q4 2018’s own, mind, and its gains over Q3 2018 in terms of dollar volume in percent terms were puny. But, still, an up quarter is an up quarter. Late-stage deal volume grew more (9.4 percent) compared to its year-ago quarter while dollar volume grew less (3 percent), leaving the average and median round sizes for the stage somewhat flat. For early-stage companies, this late-stage strength is likely welcome as it implies that the investors writing big checks are still doing so, and may keep at it when the younger companies need the capital.

All that is useful grounding for us as we keep tracking high-growth private companies, but let’s narrow a moment and look at Q3’s results that were generated closer to home.

Our report concerning the United States and Canada contains some data that match global trends. Namely that the Seed market for North American companies is also projected by Crunchbase to have been strong in Q3 2019, just as projections point to a soft early-stage venture market during the same time period.

The United States itself makes up a good-sized chunk of the global venture market, so to see its results match global tallies isn’t surprising. But as we’ve seen countries drive global venture data one direction only to surrender that same leadership later on, it’s not a certain thing that the United States’s venture market will track the world’s own. (For more on how quickly things can change, read this piece regarding China and the late-stage market.)

Taking a large step back, global and domestic venture results seem strong. Not record-setting, sure, but strong all the same. Mountains of money continue to move from the venture market into the world’s various startup ecosystems. So, while things may have been hotter here, or there, at some point in the past, I’d sum up by saying that the global and domestic venture markets were better than I expected in Q3.

How long that can last? I do not know. But we will know when 2020 starts if recent mess will cause any material harm.

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But those developments are not reflected in funding numbers for the just-ended quarter. Crunchbase data shows that investment in U.S. and Canadian startups was still rolling along at historically high levels in Q3.

Overall, investors put $36.16 billion to work across all stages in the third quarter, according to projected totals for North American startups. That’s up a bit from Q2 and a median performance relative to the past five quarters.

Deal counts were up, too. In the just-ended quarter, Crunchbase projects that investors backed a total of 3,563 funding rounds, the highest tally in five quarters, by a smidgen. A pickup in deal-making at the angel and seed stage boosted the Q3 totals.

It was also a strong quarter for exits, albeit with several instances of some weak aftermarket IPO performance. More than 20 private, venture-backed companies carried out public offerings (our running list of 2019 IPOs is here). M&A was also not bad, with a number of deals .

Below, we chart and analyze the numbers in more detail, focusing on investment totals, deal counts, stage-by-stage dealmaking, and exits.

Total Funding And Round Counts

First, we’ll look at funding totals for the quarter. The chart below tallies up investment across all stages, from seed through technology growth.

As you can see, no slowdown here, at least looking at the overall numbers. The chart does show a decline in early stage investment, which could be a worrisome sign. More on that as we look at stage-by-stage trends.

Next, let’s take a peek at round counts in the chart below:

The broad takeaway here is that round count totals were comparatively high in Q3, with a rise in seed-stage financings compensating for a dip in early-stage dealmaking. Now, let’s take a closer look at what’s happening at each stage.

Seed

It all starts at seed stage, so we’ll begin here. The big picture: Seed deals got bigger on average from year-ago levels, and there were more of them.

Investors put $1.92 billion into seed-stage deals in Q3, per Crunchbase projections. That’s up sharply from Q2 and the highest total in five quarters. Projected seed funding deal counts were up as well in Q3, with the total expected to slightly exceed 2,200.

One of the factors behind the rise in seed funding totals is an increase in what Crunchbase calls “supergiant seed rounds,” or seed deals of $5 million or more. Rounds of this size used to be a rarity, but have become much more common in the past couple of years.

Early Stage

Early-stage dealmaking (Series A and B) was less robust in Q3 compared to other recent quarters.

Overall, startups raised $11.5 billion in early-stage funding in Q3. That’s about on par with year-ago levels, but represents a drop of 14 percent from Q2 totals.

Round counts, meanwhile, showed deeper contraction. A total of 1,045 companies are projected to close a Series A or B round in Q3—the lowest level in five quarters. In all, third quarter round counts are down around 12 percent from Q2 and year-ago levels.

In the charts below, we look at both round counts and investment totals for early-stage over the past five quarters:

At the moment, it’s unclear what drove the decline in early-stage investment and deal counts. There’s a lot of money sloshing around the venture space, so it’s likely not about capital shortages and more about investors not finding as many candidates that they wanted to back.

That said, there were plenty of really large early-stage rounds in Q3, for companies in a broad range of industries. We list a few of the largest below:

Late Stage

While we saw some faltering in early-stage funding in Q3, late-stage held strong.

North American companies raised $20.9 billion in late stage rounds (Series C and beyond) over the course of the quarter. That’s a rise of 14 percent from Q2 and up 11 percent from the same period last year.

Round counts totaled 282 – about average for the past five quarters, with median round size flat.

A few really large later-stage rounds played a big role in boosting the quarterly totals. Below, we look at some of the largest Q3 funding recipients in North America:

Technology Growth

Technology growth is the most volatile category Crunchbase tracks, as there are few deals at this stage and they occasionally are huge enough that a single deal moves the quarterly totals.

For Q3, tech growth deals brought in $1.83 billion across 24 rounds.

IPOs

So, enough about money going into startups. What about companies actually providing some returns?

Turns out, the third quarter was a pretty good one in terms of venture-backed tech and healthcare companies making it to market. At least 21 such companies carried out IPOs in Q3 ().

Aftermarket performance, however, was more up-and-down, with some high-buzz companies seeing share prices fall sharply following their debuts, while others held on to gains.

Software unicorns, including and , confirmed there’s still plenty of demand from public investors for high-growth software plays. Disappointing debuts by high-end fitness startup and teeth-straightening provider indicated investors have less appetite for sustaining sky-high valuations in other sectors.

In the chart below, we look at five of the largest venture-backed IPOs of the quarter, based on capital raised.

M&A

Now, onto M&A. While acquisitions don’t provide as much buzz as a blockbuster IPO, they do account for a majority of startup exits.

Since many acquisitions are of undisclosed size, it’s difficult to gauge the returns they’re generating. However, we can look at the handful of large M&A deals for the quarters as at least a partial indicator of what acquirers are willing to pay a lot to buy.

With that in mind, the chart below looks at five of the largest disclosed-price M&A deals of the quarter involving venture-backed tech and biotech companies:

The Big Picture

The Q3 numbers, overall, point to a pretty strong funding environment. However, there is reason for greater concern than the numbers might seem to warrant.

That’s because a lot of warning signs for the startup and unicorn space cropped up towards the end of the quarter. These include the WeWork IPO drama, disappointing Peloton and SmileDirectClub debuts, and a growing sentiment that private investors may have overshot in valuations assigned to high-growth companies outside the software space.

As 2019 enters its final quarter, the exuberance that defined the unicorn space for most of the year is leveling down some. We’re not saying the party’s over, but it might be winding down a bit.

Methodology

The data contained in this report comes directly from Crunchbase, and in two varieties: projected data and reported data.

Crunchbase uses projections for global and U.S. trend analysis. Projections are based on historical patterns in late reporting, which are most pronounced at the earliest stages of venture activity. Using projected data helps prevent undercounting or reporting skewed trends that only correct over time. All projected values are noted accordingly.

Certain metrics, like mean and median reported round sizes, were generated using only reported data. Unlike with projected data, Crunchbase calculates these kinds of metrics based only on the data it currently has. Just like with projected data, reported data will be properly indicated.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to US dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs, and other financial events as reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of Funding Terms

• Seed/Angel include financings that are classified as a seed or angel, including accelerator fundings and equity crowdfunding below $5 million.
• Early stage venture include financings that are classified as a Series A or B, venture rounds without a designated series that are below $15M, and equity crowdfunding above $5 million.
• Late stage venture include financings that are classified as a Series C+ and venture rounds greater than $15M.
• Technology Growth include private equity investments with participation from venture investors.

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In the Money In section, we will cover Crunchbase’s projections of how—and how much—the global venture capital ecosystem invested in Q3 2019. We’ll then evaluate how that result compares to both Q2 2019 and Q3 2018, giving us perspective on sequential quarter and year-over-year performance.

In the Money Out section, we’ll review acquisition statistics and highlight other notable liquidity events, including the thawing market for technology IPOs.

To help you digest this report, each section will contain a bullish and bearish key finding. Without further ado, let’s dive in.

Money In

• Bullish key finding: Venture capital deal volume hit an all-time high, according to Crunchbase projections. This growth was largely driven by a large uptick in seed-stage deals, as well as ongoing development and maturation of international startup markets.
• Bearish key finding: Continued declines in China’s VC market led to a plateau in VC dollar volume growth worldwide. Additionally, projections indicate declines in early-stage deal volume, which may presage problems for later-stage investors years down the road.

Global Funding Activity: A View From Cruising Altitude

Crunchbase projects that, worldwide, $75.6 billion was invested across 9,100 venture capital deals in Q3 2019.

Spurred by a spurt of seed-stage activity, worldwide venture deal volume is projected to reach new post-Dot Com heights. However, venture dollar volume, which has been primarily driven by very large, very late-stage rounds, remains below all-time highs (a projected $87.4 billion in Q2 2018) and appears to have flattened out over the past several quarters as the most cash-hungry unicorns graduate to public markets.

The number of venture deals and the total dollar amount invested in those deals are very different numbers. You can think of deal volume as the velocity of the global venture market. And, similarly, you can think of dollars invested as the weight of those global venture deals.

Deal volume is growing faster outside North America. In Q3 2019, U.S. and Canadian companies netted 39.2 percent of venture deal volume across all stages, according to Crunchbase data and projections. That’s compared to 43 percent in Q3 2018. Although the shift is small, it results from a fairly consistent trend.

In this respect, the center of venture capital gravity is shifting away from the U.S. and Canada. However, with respect to dollar volume, North American companies are gaining ground. North American startups raised 47.8 percent of worldwide venture dollar volume in Q3 2019, up markedly from the 43 percent proportional share U.S. and Canadian startups called down in Q3 2018.

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.

China’s diminished position in the global VC market is highlighted in Crunchbase News’s recent analysis of what we call “supergiant rounds.” These VC deals of $100 million or more account for 45.1 percent of known venture dollar volume transacted in 2019. Supergiant deals, almost by definition, have an outsized influence on dollar volume totals, and when a country’s share of supergiant rounds declines, so does its contribution to the market as a whole. Crunchbase News found that, in Q3 2019, Chinese startups raised 20 supergiant rounds according to Crunchbase data, down from a high of 50 such deals in Q3 2018.

With this high-level overview out of the way, let’s dig into some more of the headline numbers.

Pace of Dealmaking

Crunchbase projects that global venture deal volume hit a new all-time high in Q3 2019.

Global venture deal volume grew by over 9.3 percent from last quarter, the largest projected quarter-over-quarter growth rate in over a year. Relative to the same quarter in 2018, global deal volume is up nearly 9.9 percent.

Deal volume growth is a global phenomenon. North America accounted for approximately 39.1 percent of total projected deal volume last quarter, down slightly from 43 percent of total deal volume in Q3 2018.

Projected VC Dollar Volume

Crunchbase projects that dollar volume is basically flat, and only slightly higher, compared to the sequentially preceding quarter. This being said, dollar volume is down on an annual basis. Crunchbase data projects a $2.8 billion gap in overall funding between Q3 2019 and Q3 2018.

However, as we’ve seen in the past, part of this gap is attributable to outsized rounds, which, as outliers, can skew the numbers by a significant margin. For example, the top ten largest startup funding rounds of Q3 2018—including a , a closed by Chinese state-backed media company CMC Inc, and $1 billion funding rounds raised by the likes of , , , and —raised over $10.2 billion collectively.

By comparison, the ten largest rounds from the past quarter netted those companies about $7.3 billion in venture funding. Apart from funding rounds raised by I and , there were no other rounds of $1 billion or more, compared to six in Q3 2018.

The decline in dollar volume can be in part attributed to the change in the size of the largest rounds recorded in the quarter, compared to its year-ago counterpart.

Most Active Lead Investors

In the case of most venture deals, there’s a “lead” investor. Typically, lead investors initiate and run due diligence, syndicate the deal to other firms, and usually write the biggest check of the round. Lead investors often take seats on the company’s board of directors, where they can exert governance and control functions necessary to ensure the best financial outcome for their limited partners.

Crunchbase’s funding round data typically lists the set of investors involved in a given venture deal. It usually (though not always) specifies which among the listed investors led the round. In the chart below, we chart the investors which participated in the most early- and late-stage deals in Q3 2019. Keep in mind that these counts are subject to change as additional funding round data is added to Crunchbase over time.

Stage-By-Stage Analysis of Q3 2019 VC Funding Trends

In this section, we’ll start close to the entrepreneurial metal by looking at seed-stage deals. From there we’ll climb our way up the capital stack, skittering across the alphabet soup of Series As, Series Bs, Series Cs, etc., from seed to very late-stage venture.

Angel And Seed-Stage Deals

Q3 2019 brought a veritable explosion in angel and seed-stage dealing.

Crunchbase projects that $4.44 billion was invested across 5,875 angel and seed-stage deals. (More information about the types of rounds included in this stage can be found in the Methodology section at the end.)

Seed-stage startups are sprouting up (and raising capital) like it’s going out of style. According to Crunchbase projections, deal volume is up a massive 18.5 percent since last quarter and 17.6 percent since Q3 2018. Dollar volume is up by similarly large margins—growing by 24.2 percent quarter-over-quarter and 7.7 percent year-over-year. For any early-stage investors worried about future deal-flow pipeline issues, this growth should be heartening.

On the one hand, angel and seed-stage deals are a big part of the global venture landscape, accounting for nearly 65 percent of deal volume in Q3 2019. However, because these deals are quite small (typically less than $5 million, though there’s an uptick in super-sized seed deals) they accounted for just 5.9 percent of total venture dollar volume—a virtual rounding error as far as that metric is concerned.

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 percent of worldwide angel and seed-stage dollar volume in Q3 2019, up from 34.7 percent of global totals in Q3 2018. Simultaneously, North America’s share of global deal volume is on the decline: from 40.8 percent in Q3 2018 down to 37.7 percent in Q3 2019.

Angel and seed-stage deals are also growing worldwide. The average seed deal in Q3 2019 is 7.1 percent larger than Q2 2019 and 15.4 percent larger than in Q3 2018. Although quarter-over-quarter change in the average deal size is likely attributable to outsized outlier rounds, changes in median deal size—the center value in the distribution—point to broader population-scale changes. Seed-stage deals really are getting larger.

Early-Stage Deals

Early-stage deals are the bread and butter of venture data. Crunchbase projects that $27.63 billion was invested across 2,572 early-stage deals in Q3 2019.

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 percent of its deal volume and roughly 36.8 percent of dollar volume to early-stage startups.

It appears as though early stage is one in which more money is chasing fewer deals over time. Early-stage deal volume declined quarter-over-quarter and year-over-year, whereas dollar inflows continued to grow. Early-stage venture dollar volume is up 2.8 percent quarterly and 7 percent annually, according to Crunchbase projections.

Considering the ballooning seed-stage market, this is an interesting phenomenon, but one that may reverse course as seed-stage companies mature and, presumably, will start seeking additional funding. If this dynamic does not change over the next several quarters, the early-stage crunch of yesteryear will return in full force.

The same pattern of geographic divergence exists amidst early-stage investments as with their earlier counterparts. U.S. and Canadian startups accounted for 36.6 percent of worldwide early-stage dollar volume in Q3 2018, which grew to 41.3 percent in the just-ended quarter. And again, the geographic distribution of deal volume is trending the other direction. North American startups accounted for just 40.1 percent of worldwide early-stage deal volume in Q3 2019, compared to a marginally more robust 44.9 percent back in Q3 2018.

In the case of early-stage deals, we see similarly robust round size growth.

Quarter over quarter, the average early-stage round grew by 5.9 percent. Compared to the same period last year, Q3 2019’s average early-stage round grew by 10.2 percent. Significant growth in median round size, particularly on a year-to-year basis, largely rules out outliers as the sole driver behind changes in these metrics: as seed rounds grow, so do early-stage deals.

Late-Stage & Technology Growth Deals

Crunchbase projects that, combined, $43.37 billion was invested across 653 late-stage and technology growth deals in Q3 2019.

Late-stage and technology growth deals are fewer in number than early-stage deals but much larger in size. Late-stage deals—Series C, Series D, and beyond, plus a high-dollar subset of other equity funding types—and private equity deals raised by previously venture-backed companies (which Crunchbase calls “technology growth” rounds) account for just 7.2 percent of deal volume, but 57.4 percent of total dollar volume.

Since technology growth deals are relatively few and far between (a projected 44 deals representing just over $2.5 billion) we’ll focus here on traditional late-stage deal and dollar volume.

Late-stage deal and dollar volume is up on both a quarter-over-quarter and year-over-year basis. Crunchbase projections indicate that deal volume is up 5.4 percent relative to Q2 2019, and grew by an even more robust 9.3 percent compared to Q3 2018. In dollar volume terms, the differences between quarterly and annual growth are more stark: dollar volume grew QoQ by roughly 12.4 percent, but is up just 3 percent relative to the third quarter of last year. It should be noted that, between Q2 2018 and Q3 2018, there was the largest quarterly decline in late-stage dollar volume, worldwide, in several years. In other words, the late-stage market is in something of a holding pattern.

This holding pattern becomes more apparent when looking at how late-stage round size has changed over the past several quarters.

Average late-stage deal size in Q3 2019 is up 8.3 on a sequential quarterly basis, but grew by only 2.5 percent compared to the same time last year. Again, when dealing with smaller sample sizes with high variance, outliers can skew averages by a significant margin. Median deal size is the metric which shows that late-stage venture is a market gone sideways. Median late-stage deal size is unchanged on a quarterly basis, and up just 3 percent relative to the same period last year.

Even at these latest stages of the venture lifecycle, a similar pattern of geographic distribution of deal and dollar volume is present to what we saw at seed and early-stage.

When it comes to dollar volume, North American companies are gaining on peers located in the rest of the world. U.S. and Canadian startups accounted for 47.8 of late-stage and tech growth dollar volume in Q3 2019, up from 43 percent the year before. That said, deal volume is growing more quickly elsewhere. North American startups made up 39.1 percent of late-stage and tech growth deal volume this past quarter, compared to 43 percent in Q3 2018.

Money Out

• Bullish key finding. Software companies are seeing strong exits through IPOs.
• Bearish key finding. Certain well-funded unicorns stumbled while working to provide liquidity to their shareholders.

A Quick Overview Of Liquidity

Startup equity is an illiquid asset, meaning that there isn’t really an open market for private company shares. Founders, employees, and investors often hold startup stock for long periods of time, but to realize their capital gains, stakeholders need to “exit” their positions. Unlike publicly-traded stocks, which can be bought and sold more or less instantaneously on an open exchange, private company shareholders rely on two primary paths to liquidity: a merger or acquisition (M&A) or an initial public offering (IPO).

There is a third path: selling shares in a . However, since private companies aren’t typically required to disclose these internal sales to the public and most of the major secondary market brokers are pretty secretive about their clientele and dealmaking, there just isn’t enough available information to comment on broader trends in the secondary market. This being said, as companies continue to prolong their time to exit by way of IPO or M&A, early stakeholders are more likely to lobby for this alternative path to liquidity.

Below we’ll look at traditional startup liquidity methods, M&A and IPOs.

Venture-Backed Acquisitions

Q3 2019 venture-backed M&A deal volume clocked in at 326 reported transactions, down 14.2 percent. This marks the largest QoQ M&A deal volume decline in at least three years. Dollar volume is quite variable from quarter to quarter, so we don’t place much analytical weight on that measure, but it’s worth noting that there weren’t many high-dollar deals in Q3 either.

Over the past several quarters, Crunchbase News has documented the persistent general downtrend in reported venture-backed M&A. Though some quarters see more deals than others, the general pattern is one step forward and two steps back.

Initial Public Offerings

The second path to exit is through an initial public offering.

Throughout their private-company existence, startups have fairly limited options when it comes to the types of investors they’re able to raise from. Because startup equity is a fairly risky asset class, most jurisdictions limit access to “sophisticated” investors. Which is to say, mostly wealthy folks.

To raise money from the general public, companies typically undergo a period of intense regulatory scrutiny to ensure that the company is nominally doing what it says it’s doing and that its financials are up-to-date and reasonably transparent. Though newly-public companies still present plenty of risk, once regulators deem them safe enough for public consumption, startups are able to raise money on the open market. As part of this process, common and preferred shares in the previously private company become publicly-traded securities, giving early stakeholders the option to either hold their position or liquidate it for cash, following the customary lock-up period.

Q3 2019 presented something of a turning point in the IPO market. Companies with robust fundamentals and a narrative which suggests continued growth did fairly well. Others, with “visionary” founders and specious claims about “elevating consciousness” and “selling happiness” didn’t fare so well.

Here we see a real stratification in the IPO market. On the one hand, technology companies with strong economics, a profitable business (or a clear path to profitability), reasonable prospects for growth, and a stable management team have done fairly well when raising from public markets. , for example, priced its IPO at $27 and opened at $40.35 in its first trades as a public company. At time of writing, its shares trade at $37.

For companies with more faith-based valuations, not so much. is definitely the most conspicuous flop of the quarter, but other ventures with lofty private market valuations also stumbled out of the gate. Interactive fitness firm and its underwriters set an IPO share price of $29, but its shares closed out day one of public-market trading at $25.76. At time of writing, Peloton shares trade below $24.

Lackluster IPOs (and failures to launch) in Q3 affect the future IPO pipeline. Postmates CEO Bastian Lehmann said his company will delay its public market debut, citing “choppy” market conditions.

Additionally, the IPO process itself is being called into question. An effort led by general partner advocates founders on open-market exchanges. This could work for profitable companies like Airbnb, which don’t really need the additional working capital underwriters provide.

With WeWork’s IPO shelved seemingly indefinitely, Airbnb slated to go public (whether by direct listing or through a traditional IPO) in 2020, and Postmates delayed until further notice, Q4’s IPO calendar might look a little sparse.

Conclusion

The current bull run for startups might be getting a little long in the tooth.

The fates of some of most lavishly-funded ventures from this past cycle were largely decided this year, and the outcomes weren’t always great. The introspection brought by humdrum debuts by the likes of Uber, Lyft, Slack, Peloton, and others (including WeWork’s non-debut) prompted a moment of introspection for some tech investors. What, exactly, is a tech company in a time where basically everything a business does these days is mediated through a website or mobile app? What kind of margins merit tech company valuations? How does one balance the wishes and whims of founders with the long-term well-being of the company as a whole, when more than just personal cash is at stake?

If, in the long run, the market that’s consistently coming up a little light these days, then the scales might start tipping in the other direction: toward diminished founder power; toward more muted valuations; toward more scrutiny of claims that a “tech company” is actually a tech company; toward, ultimately, more discipline. Because investor largesse has gotten the market—what?—flat-lined public offerings, heaps of cash torched in protracted wars of attrition with similarly-funded competitors, employees who are underwater on their options, and a staggering amount of faith placed on founders spouting woo about changing the world. The first rule of changing the world is that you don’t talk about changing the world.

With any luck, it is the culture of disruption that will itself be disrupted by a new way of doing business, just like would suggest.

It’s for this reason that the spike in seed-stage venture is, ultimately, heartening. Whether these founders and their backers are taking a leap into new ventures just as the bottom threatens to fall out from under global political and economic order remains to be seen. But assuming we dodge economic calamity, hopefully the excesses revealed by last quarter leave a mark in the market’s collective memory.

Tech may be new-fangled, but the principles of business never change. Try to make more money than you spend. Provide a quality product or service, consistently. Grow at a pace you can afford. And do your best to ensure that everyone comes out a little better off than they went in. That’s not what’s happening everywhere in startup-land, but it doesn’t have to be the same going forward

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Methodology

The data contained in this report comes directly from Crunchbase, and in two varieties: projected data and reported data.

Crunchbase uses projections for global and U.S. trend analysis. Projections are based on historical patterns in late reporting, which are most pronounced at the earliest stages of venture activity. Using projected data helps prevent undercounting or reporting skewed trends that only correct over time. All projected values are noted accordingly.

Certain metrics, like mean and median reported round sizes, were generated using only reported data. Unlike with projected data, Crunchbase calculates these kinds of metrics based only on the data it currently has. Just like with projected data, reported data will be properly indicated.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to US dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs, and other financial events as reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of Funding Terms

• Seed/Angel include financings that are classified as a seed or angel, including accelerator fundings and equity crowdfunding below $5 million.
• Early stage venture include financings that are classified as a Series A or B, venture rounds without a designated series that are below $15M, and equity crowdfunding above $5 million.
• Late stage venture include financings that are classified as a Series C+ and venture rounds greater than $15M.
• Technology Growth include private equity investments with participation from venture investors.

Illustration:

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At the end of Q2, we wrote about how China had fallen behind the United States and the rest of the world in terms of the number of supergiant venture rounds its companies were pulling. We define “supergiant rounds” as those of $100 million or more. It’s an eye-popping amount, yet at the same time, supergiant rounds have become more and more common as ample amounts of capital slush around in the market.

And now that Q3 has ended, we’re here to report that China’s third-place spot hasn’t changed.

Companies based in the United States brought in the largest number of supergiant rounds during the third quarter, with going to the U.S. That’s down slightly from last quarter when U.S.-based companies raised 66 supergiant rounds over the course of the three-month period.

China’s supergiant round status stayed about the same during Q3 as it did for Q2—there were , as opposed to 20 in Q2.

The number of supergiant rounds in China hit its peak during the third quarter of 2018. That number’s seen a significant dip from 50 rounds in Q3 ‘18 to 21 supergiant rounds in Q3 ‘19.

But even at its peak in 2018, China had fallen behind the United States for the number of mega-rounds. It was still ahead of the rest of the world until the beginning of this year when China fell to third place.

China Lags

2019 hasn’t been a great year in terms of U.S.-China trade relations, and that could very well be a factor in China’s dip to third place.

The largest venture round for Q3 was . The self-driving technology company now has . And since Argo is based in Pittsburgh, that means the U.S. was the country to have a company pull in the largest funding round these past three months.

The largest venture round to go to a Chinese company during Q3 was . That number is nothing to sniff at, but it’s worth noting that China didn’t have any funding rounds that cracked the $1 billion mark.

China’s produced a number of startups that have become hugely popular both domestically and around the world (perhaps most notably , the parent company of popular video-meme app ). The third quarter also saw Chinese companies list on American stock exchanges or take the first steps to do so (think and ).

Venture dollars are also still flowing to the Chinese companies. But the big rounds—just more than half of them—are still being pulled in by U.S. companies.

Now that Q3 is done, Crunchbase News will have more analyses on quarterly trends in the upcoming days. .

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