Over the five-year period from 2012 to 2017, as total venture capital investments more than doubled, growing from $41.2 billion to $84.0 billion, the number of deals increased by just 2.7 percent according to new data from the NVCA-Pitchbook Venture Capital Monitor. In 2017, more than half of all venture capital deals and three-quarters of all venture capital dollars went to companies in California, New York, and Massachusetts in 2017.

With the 2017 data in the books (see our analysis of MoneyTree and useful stats from the Venture Monitor), we can take a more informed look at the prospects for the industry in 2018.

Venture-backed startups generate nine times the knowledge spillovers (e.g., patenting activity and citations) when compared to that produced by R&D investment of established companies, according to recent research.

Tuesday’s announcement by Revolution of the creation of a $150 million Rise of the Rest Seed Fund for companies located outside of Silicon Valley builds on Steve Case’s tour to connect with entrepreneurs throughout the middle of the country. The Rise of the Rest Seed Fund enjoys the backing of more than three dozen other big investors from Jeff Bezos and Eric Schmidt to the Waltons and Kochs, and is intended to provide support and connections to entrepreneurs in small towns and underserved cities.

In this first part of a two-part series, SSTI will look at the common themes and trends of 2017 that were highlighted in the 2017 MoneyTree Report. In part two, SSTI will provide insights on some potential new trends observed last year that may continue to affect the investment of venture capital in 2018.

Through the third quarter of 2017, the venture capital market saw an average deal that invested more money into larger and older companies than in prior years. With fewer exits and deals occurring throughout the industry — as well as a historic $90+ billion in uninvested capital (aka “dry powder”) — a reasonable expectation might be that funds would have a difficult time raising capital.

The equal-weighted internal rate of return (IRR) for the venture capital (VC) industry was 6.6 percent between Q2 of 1999 and Q2 of 2017, according to the 1Q 2018 PitchBook Benchmarks. Over that 18-year timespan, several other asset classes – such as private equity (10.5 percent), debt financing (10.1 percent), fund-of-funds (8.1 percent) and several stock market indices – significantly outperformed the VC industry’s equal-weighted IRR.

PitchBook and NVCA released the 2018 Q1 Venture Monitor this week, and the data show that 2017’s trends toward fewer, larger deals are only accelerating into the new year. First financings are over $5 million for the first time since Q3 of 2006, and the average angel and seed deals are at their largest sizes in at least a decade — largely due to investments under $1 million now accounting for just 39 percent of disclosed deals.

Valuations of venture backed companies and the number of unicorns are rising based on the leading nationwide surveys, but closer examination of the data reveals not all startups are seeing the effect. The median valuation for female-founded companies, for example, was lower in 2017 (approximately $11 million) than it was in 2007 (approximately $15 million), according to research from PitchBook’s Dana Olson.

Over the six-year period from 2013 to 2018, as total venture capital investments nearly tripled, growing from $47.5 billion in 2013 to nearly $131 billion in 2014, the number of deals increased by just 13.5 percent according to new data from the NVCA-PitchBook Venture Capital Monitor. The $131 billion in total VC investments in 2018 is the largest amount since PitchBook began tracking the data in 2006 and the first year since the height of the dot-com boom that annual capital investment eclipsed $100 billion.

While many state startup capital ecosystems have a healthy density of early-stage startups, few states have developed strong late-stage ecosystems, according to a new report from PitchBook – 2Q 2018 PitchBook Analyst Note: VC Ecosystems. PitchBook researchers contend that one potential factor leading to these underdeveloped late-stage ecosystems is the limited number/size of exits coming from those ecosystems.

After considerable growth in the number of startups raising a first round of venture capital financing between 2009 and 2014, there has been a geographically widespread contraction, according to new research from Ian Hathaway at the Center of American Entrepreneurship, a D.C. based advocacy group. In America’s Rising Startup Communities, Hathaway explores the geography of first venture capital financing across U.S.

An SSTI analysis of exits occurring during the second quarter by a number of venture development organizations reveals equity investment in innovation companies undertaken as strategic public-private partnerships for regional growth can yield more for their communities than just hitting the return on investment expectations of seed and traditional venture capital. The recent exits highlighted below reveal a variety of economic development impacts resulting from effective innovation investment strategies, including:

Two 2017 Q3 venture capital market updates are not providing much clarity on the underlying state of the industry. Data on greater uninvested capital, larger deals and fewer exits, among other indicators, suggest that venture capital is in need of a market correction. At the same time, new fundraising, a move toward wider geographic distribution and the rise of alternative financial structures could speak toward the emergence of a more sophisticated market. In the absence of decisive indicators, the data allow for any number of explanations and predictions.

As we enter the second half of 2017, the U.S. venture capital (VC) market is driven by several noticeable trends. After peaking in 2015, the current VC market continues its slow decline in the number of deals, but Q2 of 2017 saw a spike in mega-rounds – rounds of $100 million or more. These mega-rounds are accompanied by strong fundraising efforts including a record-setting mega fund launch.

The U.S. Department of Treasury released its final annual report for the State Small Business Credit Initiative (SSBCI), which provided funding to states for lending and investment programs. “Venture capital” programs, often structured for pre-seed (13 percent of funds), seed (27 percent) or early stage (45 percent) investments, attracted $4.2 billion in immediate private financing against $327 million in federal dollars.

A well-known fact about the venture capital industry is the notorious underrepresentation of women partners in the firms.  That could change, suggests research presented in the NBER working paper And the Children Shall Lead: Gender Diversity and Performance in Venture Capital if male VC partners spend more quality time with their daughters.  Deborah Krueze writes in her NBER Digest article that the authors of the research, Paul A. Gompers and Sophie Q.

Inclusive workforce development, downtown revitalization, and an influx of funds for venture capital are among the proposals in an economic development strategy unveiled by New Jersey Gov. Phil Murphy earlier this week. In an effort to focus on bottom-up development rather than a package of tax incentive programs favoring big businesses, the strategy seeks to build the nation’s “most diverse and inclusive innovation economy.”

The Angel Capital Association is piloting a new report on the factors that influence successful angel investing and the startups that angels support.  The initial Angel Funders Report covers 2017 data from 26 angel groups and provides new insights for one year of investments. Some of the report’s key findings include:

NVCA and PitchBook released Venture Monitor 3Q 2018 this week. The highlight data point in the report is that total U.S. venture capital investment in 2018 is on pace to break $100 billion for the year — and, in fact, to break $110 billion. At the same time, deal volume is on pace to be at the lowest level since 2012, with just 6,583 deals reported to date in 2018.