Companies May Stay Private as VCs Invest $32.5B, Report Says

As record levels of venture funding piles into startups, more companies may stay private rather than file for initial public offerings, according to venture capital database CB Insights and accounting firm KPMG.

Private companies raised more than $32.5 billion in the second quarter of 2015, with about half of the total coming from 61 deals that were worth more than $100 million each, according to a new report released by the firms this morning. That helped create some 24 so-called unicorns during the quarter—companies with a valuation of greater than $1 billion—a number that the researchers expect will increase.

That $32.5 billion total is the most raised in any quarter since the start of 2011, when CB Insights and KPMG started collecting data.

“If you told a company that they could raise almost the same amount of money at the same valuation in a private financing versus a public one, there is no question that companies would often choose to stay private longer,” Brian Hughes, who works in KPMG’s U.S. venture capital practice, said in the report. “Staying private gives the company more latitude to do what they need to do to grow their business for the long term.”

The report is the first in a series of quarterly data KPMG and CB Insights are initiating on venture capital investing worldwide.

Venture-backed companies raised $19 billion during the quarter in North America, a number that parallels stats reported by Dow Jones VentureSource last week. The activity during the first half of the year, both in North America and worldwide, indicates 2015 will be a blockbuster, if things stay on pace.

Companies raised $58.2 billion in North America during all of 2014, compared with $37.5 billion so far this year. Worldwide, investors contributed $88.3 billion of venture funding to private startups in 2014, not much more than the $60 billion spent so far this year, according to CB Insights and KPMG.

In the U.S., California VC activity last quarter outstripped any other state, according to the companies. Its companies raised $11.4 billion, while New York companies pulled in $2.2 billion, and Massachusetts startups reeled in $1.4 billion.

Texans took home $376 million in deals, while companies in the Pacific Northwest accounted for $489 million, according to the firms.

While valuations have been on the rise worldwide, they remain lower in Europe than in Asia and the U.S. That has attracted a greater level of U.S. investors to European deals, according to the research firms, which has in turn attracted investors from other areas of the world, too.

European companies raised $3.2 billion in the quarter, which was the second-largest amount since the start of 2011, only behind the $3.4 billion raised in the first quarter of this year, CB Insights and KPMG said. Asian companies raised $10.1 billion in the quarter, the largest since 2011.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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