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Venture Firms Turn Down Funding Volume, but Still Rockin’ in Q3

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into Internet startups, which also accounted for about 70 percent of the deals.

The amount VCs invested in New York during the third quarter was roughly twice the $683 million that venture firms invested in 65 deals in Massachusetts.

Venture dollars and deals in the Bay State both fell by roughly a third from the previous quarter, when VCs invested just over $1 billion in 100 startups.

The biggest surprise, however, may be the $400 million that venture firms deployed in 14 startups in Utah—a number driven chiefly by sizable investments in Pluralsight and Qualtrics. It was nearly three times the $136 million that VCs invested in Utah startups during the previous quarter, according to CB Insights.

VCs invested $26.5 million in 7 deals in Wisconsin, and $24.2 million in 5 deals in Michigan

(VCs invested $26.5 million in 7 deals in Wisconsin, and $24.2 million in 5 deals in Michigan)

California, as usual, was far and away the biggest recipient of venture capital activity, with nearly $5.2 billion invested in 406 startups. The amount invested was down 42 percent from the previous quarter, when VCs deployed over $8.9 billion in 442 companies. On the other hand, the three mega investments in Uber, Airbnb, and Pinterest that blew out the previous quarter were all California deals.

 

In other noteworthy trends, CB Insights reports:

—So far this year, 21 companies have raised their first-financing with a valuation of at least $1 billion. Qualtrics and Credit Karma were among the new entrants in the third quarter.

—The number of late-stage deals (Series D rounds and later) remained strong, accounting for 16 percent of all venture deals during the third quarter. Early stage deals remained normal, and accounted for about 55 percent of all deals. But in terms of dollars invested, the share of Series B funding rose to take a fourth of all VC funding during the quarter, with late-stage funding falling to about 39 percent, after taking nearly half of all venture funding in the first and second quarters.

—The IPO market for venture-backed companies fell significantly. Just 18 U.S. companies went public during the third quarter, compared to 24 in the second quarter and 35 in the first quarter.

Silicon Valley got 84 percent of all Q3 financing deals in California.

Silicon Valley got 84 percent of all Q3 financing deals in California.

CB Insights speculates that the tech sector was intimidated by Hangzhou, China-based Alibaba’s IPO, with only one U.S.-based company, TubeMogul, going public during the quarter. Meanwhile, healthcare IPOs accounted for 83 percent of all VC-backed IPOs in the quarter, with Cambridge, MA-based Sage Therapeutics scoring the highest valuation at more than $400 million in mid-June.

—Venture funding for startups in the mobile and telecom sector fell by over 50 percent, from $2.6 billion in 146 deals in the second quarter to $1.2 billion in 145 deals during the third quarter. Investments in Internet deals also dropped, from $5.6 billion in 437 deals during the second quarter to $4.5 billion in 410 deals during the third quarter. Healthcare funding likewise declined, from $2.6 billion in 146 deals to $1.7 billion in the latest quarter.

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