Global venture capital deals announced in the second quarter of 2016 (Q2 2016) amounted to 2,244, worth a combined $40 billion, a report by Preqin gathered.
This represents a 9 per cent increase in the aggregate deal value compared to the $37 billion seen Q1 2016, but a 12 per cent decrease from the 2,541 deals seen in that period.
Five deals worth $1 billion or more were announced in the quarter, pushing the average size of Q2 equity deals to $23 million, up from $18 million in the opening quarter of the year.
Although Q2 2016 marks an increase from the same quarter last year, which concluded $38 billion worth of deals, overall activity does not match the peak of $43 billion accumulated by venture capital deals in Q3 2015.
By regions, North America saw the most venture capital deal activity in Q2, with 900 deals worth a combined $18 billion.
Greater China accounted for the second largest proportion of aggregate deal value, at $17 billion, and was the location of seven of the 10 largest deals in the period.
Preqin head of venture capital products, Felice Egidio commented that venture capital deal activity saw a quarter of contrasts, with falling deal numbers and a rise in aggregate deal value.
“A small group of the largest venture capital-backed companies continue to raise ever-larger financing rounds, a key driver of growth especially in the Chinese venture capital industry. The region is now beginning to edge past North America as the most valuable startup industry in the world,” he said.
The internet sector remains the most attractive industry in terms of deal flow, representing 27 per cent of all deals.
However, for the first time in ten consecutive quarters the internet did not account for the highest proportion of aggregate deal value (21 per cent), with telecoms representing almost a third (31 per cent), the report said.
Among the deals tracked, the average size of Series D financings rose 15 per cent from 2015 to reach $111 million in the first half (H1 2016).
Venture debt deals, meanwhile, have also been worth an average of $111 million in the first half of the year.
The largest venture capital deal in the quarter was the $4.5 billion series B financing of Ant Financial in April, which gained investment from CCB Trust, China Development Bank Capital, China Investment Corporation, China Life Insurance Company, China Post Capital, and Primavera Capital.
Rising exit value
Despite reports that the opening quarter of the year saw a dearth of exits for venture capital-backed companies, 285 exits were announced globally worth a combined $18 billion, Preqin noted.
“The small number of venture capital-backed companies making exits may be some cause for concern, and certainly the value of IPOs in Q2 is very low compared to recent quarters. However, the total value of exits has risen, perhaps reflecting an easing of the cautious atmosphere that permeated the first quarter of 2016,” Edigio said.
In Q2 2016, the number of exits was lower at 244, but the aggregate exit value increased to $26 billion.
Notably, there were 29 IPOs in the quarter, with a combined exit value of just $1.1 billion. The vast majority of exit value ($23 billion) was achieved through trade sales of venture capital-backed enterprises to other companies
Trade sale was the most popular exit route, accounting for 188 deals out of the 244 tracked. Of that total exits, 29 were IPOs, 17 were write offs and 10 deals were sale to GPs, Preqin data showed.
In terms of exits, North America accounted for the vast majority of exit activity in Q2 announcing 138 exits worth a combined $14 billion.
Europe saw 55 venture capital-backed exits worth $11 billion, but no other region generated more than $1 billion in exit value.
The biggest exit announced for the quarter was the trade sale of gaming developer Supercell to Tencent for $8.6 billion.