U.S. venture capital firms invested $28.2 billion in 2,265 transactions in the third quarter, continuing the 2019 trend of declining deal flow that is not expected to surpass the record deal value of $137.5 billion in 2018, according to the PitchBook-NVCA Venture Monitor released Wednesday.
By comparison, venture capital firms invested $34.1 billion in 2,810 deals in the second quarter and $31.8 billion in 2,377 transactions in the quarter ended Sept. 30, 2018, the report showed.
But PitchBook and NVCA executives expect 2019 to be the most lucrative year in a decade, chiefly because of the $227.4 billion in total exits in the first three quarters of 2019. In the third quarter, venture capital firms sold, took public or otherwise exited companies in 189 deals worth $35.4 billion, down from $141.1 billion in 248 exits in the second quarter but up from $29.1 billion in 240 exits in the third quarter of 2018.
"Exit activity is so important for the (venture capital) ecosystem for returns and making sure capital is going back to investors," said Maryam Haque, senior vice president of industry advancement at the National Venture Capital Association.
Venture capital firms were helped by 2019's wider the initial public offering window.
"Top of mind is (shared workspace firm) WeWork and its lingering affect" on future exits, she said. However, investors see WeWork as an isolated case, Ms. Haque said.
WeWork canceled its IPO in September amid concerns over finances and governance, falling from an early valuation of $47 billion to less than $20 billion. In the wake of the aborted IPO, Adam Neumann, the company's co-founder and CEO, resigned.
Non-traditional venture capital investors, called "tourist investors," accounted for $56.9 billion, close to 60% of total deal value in the first three quarters of 2019, the report noted. The largest among these tourist investors, SoftBank, has helped to push up transaction sizes as well as venture capital fund sizes as venture capital firms try to keep pace with the Japanese conglomerate, Ms. Haque noted.
