City of Austin Texas Congress Avenue at Night from Congress Avenue Bridge

By LAURA LOREK, publisher of Silicon Hills News

Austin’s venture capital investments rose to $704 million in the first quarter of 2019, up 16 percent from the same quarter a year ago, according to the PwC/CB Insights MoneyTree report.

However, the number of deals in Austin dropped almost 8 percent to 37 in the first quarter of 2019, compared to 40 deals for the first quarter of 2018.

That means fewer, but bigger, deals are getting done in the Austin area, which is mirroring what’s going on nationally with VC investments, said John Cummins, partner with PricewaterhouseCoopers, based in Austin.

Overall, Texas companies received $1.16 billion in venture capital in the first quarter of 2019, a 51 percent increase from the same quarter in 2018, according to the MoneyTree Report.

Deals statewide remained relatively flat with 66 reported for the first quarter of 2019, compared to 67 for the same quarter a year ago.

Nationally, California led VC investments in the first quarter with 461 deals worth $13.1 billion, followed by New York’s 201 deals worth $3.8 billion and Massachusetts with 117 deals and $2.7 billion invested. Texas ranked fourth.

The Texas venture capital deals included three big deals worth in excess of $150 million each with Onit, a project management software company in Dallas receiving $200 million, Magnitude Software in Austin receiving $179 million and Peloton Therapeutics in Houston receiving $150 million, said Cummins with PwC. Those big investments led Texas to buck the national VC trend in the first quarter.

Nationally, venture capital investment fell 36 percent in the first quarter to $25 billion, with four percent fewer deals compared to the fourth quarter of 2018, according to the MoneyTree report. And the report showed “mega-deals were also down from a record fourth quarter in 2018, but well above historic levels with 46 deals worth more than $100 million in the first quarter of 2019.”

Another trend that is continuing is a decline in seed stage funding.

“Seed stage deals began to decline starting in Q3’17, at 35 percent of all deals, falling to 24 percent in Q1 ’19,” according to the MoneyTree report.

And the march of the Unicorns continues with ten new private companies valued at $1 billion plus in the U.S.

Artificial intelligence, cybersecurity and fintech are the categories that led investments nationally, Cummins said. Those are all strong categories in Austin also, he said.

Austin’s technology ecosystem continues to build, Cummins said.

“We are always watching the big tech companies that are putting larger and larger footprints in the market, Cummins said. “That is certainly helpful. It will drive competition for talent and drive demand for those types of skill sets.”

Established companies like Facebook, Google, Apple, Oracle, Zoho, Amazon and others moving campuses here will also lead to a maturation of the market and more startup activity, Cummins said.

Not unlike Silicon Valley, folks that defect from these larger companies, might jump down and launch startups, Cummins said.

“Creating that cycle is what Silicon Valley is today,” he said.

And although people have talked of a bubble for years in the tech industry, all signs in Austin look good, Cummins said.

“It’s all positive momentum from what we can tell,” he said. “When you look at these companies, they are developing real products and services and are focused on real business issues. These aren’t just ideas.”

And venture capital firms like LiveOak Venture Partners announcing the close of its second fund, Fund II, with $105 million are all good signs for the venture capital community and Austin startups, Cummins said.

“The quality of the startup community here is strong,” he said.

Austin’s Top 10 Largest VC Deals for the 1st Quarter 2019    

           Name                                 Industry                           Funding (in millions)

  1. Magnitude Software    Software                              $179
  2. Siete Family Foods        Food & Beverage                  $90
  3. RigUp                                Software                               $60
  4. Outdoorsy                       Internet                                 $50
  5. CS Disco                            Internet                                $50
  6. Ojo Labs                           Mobile & Telecom               $45
  7. ScaleFactor                      Internet                                 $30
  8. AlertMedia                      Mobile & Telecom               $25
  9. MAP Health                      Healthcare                           $25
  10. SpyCloud                          Internet                                 $21

Source: PwC/CB Insights MoneyTree Report