PE Participation In US VC Deals Dropping Fast

Private equity firms have been eager to get involved in venture capital rounds in the past decade, contributing to 8,524 VC deals globally since 2008, according to PitchBook data. But as the oversaturated dealmaking environment has grown more challenging in 2017, the number of VC deals that include PE firm participation has dropped significantly—and the amount of aggregate capital involved in the latest slew of investments has fallen, too.

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Globally, PE firms are on pace to participate in 802 VC deals this year, a 14.3% YoY decline, and the total value of those deals is on pace to reach roughly $30 billion, a significant decrease of 35.5% YoY. The drop is even more staggering in the US specifically, with 357 completed deals thus far, and YoY aggregate value on pace to decline 45.2% after reaching a high of $23.6 billion in 2016.

What's more, these same declines aren't occurring across venture capital as a whole: Capital invested in US VC rounds has already reached $68.7 billion in 2017 after $71.8 billion was invested last year, per the PitchBook Platform. Deal count is on pace to drop slightly, with 8,036 transactions compared to 8,628 last year, but the 7.4% YoY decline pales in comparison the changes in VC deals with PE involvement specifically.

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Below is a look at PE investment in US VC rounds since 2008:

There is an element of subjectivity to this type of data, since it can be difficult to distinguish a PE growth investment from a late-stage VC deal. Regardless, when you hear about such deals, don't be surprised if private equity is involved in some way. PE firms have been involved in seven of the 10 biggest VC rounds by amount since 2008, according to PitchBook data, and two of the top three deals value-wise occurred last year. A prime example came in May 2016, when a handful of PE firms—General Atlantic, Brookside Equity Partners and Glade Brook Capital Partners—participated in a $1.8 billion Series F for Snap.

Want to know more about VC dealmaking? Check out our 3Q 2017 NCVA Venture Monitor.

Article by Adam Lewis, PitchBook