Austin’s 2018 VC Funding Hits Records Levels not Seen Since 2000

By LAURA LOREK, Publisher of Silicon Hills News

Venture capital investments in Austin soared to $1.33 billion in 2018, the highest on record since the dot-com boom in 2000, according to the latest MoneyTree Report from PwC and CB Insights.

Venture capital investments in Austin rose 70 percent in 2018, from $783.4 million in total venture capital investments in 2017.

The number of deals in Austin in 2018 remained almost flat with 124 deals, compared to 123 deals in 2017.

Overall, Texas recorded $2.18 billion in venture capital invested in 226 deals in 2018, up 33 percent in dollar volume from $1.64 billion in 2017 invested in 209 deals, according to the MoneyTree report.

The fourth quarter saw a nearly 38 percent increase in dollar volume in Austin with

$220 million invested in 27 deals, the same number of deals as the fourth quarter last year, according to the MoneyTree report.

Nationwide, U.S. venture capital funding jumped to $99.5 billion, the highest yearly level since 2000, with investments in 5,536 deals, the lowest level of deal activity since 2013, according to the MoneyTree report.

Mega-deals with investments of more than $100 million are driving the funding higher, said John Cummins, partner with PricewaterhouseCoopers, based in Austin. Austin had one of those mega-deal transactions in 2018 with WP Engine receiving a $250 million investment from Silver Lake last January.

“These rounds are much bigger rounds that are coming in,” Cummins said. “Money is being invested in more mature companies.”

The U.S. saw a record number of new unicorns with 53 U.S. VC-backed companies that saw their valuation rise to greater than $1 billion in 2018, according to the MoneyTree report.

In 2018, investors spent more than $100 million with 184 deals. And while big funding continues, seed stage deals continue to fall.

“Seed-stage deal share fell to 25 percent, the third consecutive yearly decline, as larger, later-stage deals take up more U.S. funding,” according to the report.

The sectors that are driving investment in Austin include Internet, Software, Healthcare Technology and Mobile, Cummins said. Those local investments are consistent with trends nationally, he said.

Overall, 2018 was a good year for Austin and Texas, Cummins said.

Investors in Austin companies also saw some exits in 2018 with SolarWinds going public in the fourth quarter of 2018, Cummins said.

“IPO (initial public offerings) activity overall was up,” Cummins said. “We saw some positive trends in the IPO market in 2018.”

And there was a healthy number of mergers and acquisitions in Austin last year, Cummins said. Among the deals, HEB acquired Favor, GoDaddy acquired Main Street Hub and News Corp. acquired Opcity.

In Austin, the software industry led investments for the fourth quarter with Austin-based HNI Healthcare, a physician practice management company, landing the biggest investment with $65 million in funding from CRG, a New York-based investment firm.

In the mobile and telecommunications sector, Aceable, a mobile-focused platform for certification and training courses, came in with the second largest investment of the quarter with $47 million in in venture capital. Sageview Capital led Aceable’s Series B investment.

And in the Internet sector, Tenfold landed $14 million in venture capital investment. Investors included Andreessen Horowitz, Geekdom Fund, Nextcoast Ventures and Salesforce Ventures. The Austin-based company makes a web-based interface between a company’s phone and customer relationship management system to measure the effectiveness of marketing campaigns, improve customer service and increase sales.

Top 10 Austin Investments in the Fourth Quarter of 2018

CompanyInvestmentIndustry
HNI Healthcare$65 MillionSoftware
Aceable $47 Million Mobile/Telecom
Tenfold $14 Million Internet
Shipwell$10 Million Internet
SelfLender$10 Million Internet
The Guild $9 Million Leisure
Rollick Outdoors $ 8.3 Million Mobile/Telecom
Kettle & Fire$8 Million Food and Beverage
SourcceDay $6.5 Million Internet
Life by Spot $5.85 MillionMobile/Telecom

Source: PwC/CB Insights MoneyTree Report