VCs, Private Equities Close Deals Worth $162b in Q3

• VCs, Private Equities Close Deals Worth $162b in Q3

Capital seems to be flowing at breathtaking pace this year as third quarter result shows that venture capital (VCs) and private equity funds backed a total of 5,099 deals worth $162 billion in Q3, according to data released by Preqin.

Analysts say the rise in startup and public company valuations as well as increased risk appetite in the venture capital space are the main reasons for a surge in deal value.

VCs alone closed 3,894 deals worth $69 billion in Q3, bring total year to date deal making to $195 billion. This surpasses total value of VCs deals in full year 2017 which was around $189 billion. Thus, cementing investors confidence in growth companies.

Private equity deals chilled in Q3 as total deals dropped to 1,205 worth $93 billion from 1,274 deals worth $129 billion in Q2. However, year on year analysis shows that PE deals rose significantly in the preceding quarter from its level in Q3 2017.

Deals in private equity space has slowed down, causing dry powder to exceed $1 trillion as PE firms struggle to find deals as fast as they are able to raise cash. Dry powder refers to money already raised by PE firms but yet to be invested in companies.

According to Bloomberg, “valuations of potential targets are high and PE firms are facing increased competition from strategic acquirers for the best assets.”

PE deals in Q3 were predominantly in North America as the region accounted for almost 55 percent of the total private equity deals. On the other hand, VCs looked to Asia for opportunities as China accounted for 6 of the 10 largest deals announced in Q3 compared to US who only accounted for 2. Together, the two largest economies attracted 80% of the top 10 VC investment in Q3.

In Q2, Chinese startups accounted for 9 out of the top 10.

The largest VC deal in the third quarter was the acquisition of Hangzhou Mouth by Alibaba Group and Softbank for $3 billion. Singapore based ride hailing firm Grab’s $2 billion Funding round in August was the second largest VC deal during the period.

Nigerian firms were not left out of the startup binge. In Q3, Nigerian based payment solutions providers, Paystack raised $8 million while ISP startup raised $3 million. EdTech startup, PrepClass also raises $1 million as VC interest to local startups continue to increase after previous successes.