Good morning, Term Sheet readers.
If you’re a regular Term Sheet reader, you might have noticed that the VC section has been on fire lately. As I scramble to include every deal and make sure I have the company’s correct HQ (that part is not easy), it’s gotten particularly busy the last few months — and now we have the data to prove it.
With a full quarter to go, VCs have already invested $84.3 billion in U.S.-based companies during 2018, which is more than they did all of last year. At this point, venture investors are on pace to top the $100 billion mark in total cash invested sometime during 4Q. Yes — one hundred billion dollars (!)
According to the latest PitchBook-NVCA Venture Monitor, VCs are raising larger funds and pumping copious amounts of capital into fewer investments. What I found the most interesting is that non-traditional investors — like mutual funds and sovereign wealth funds (SWFs) — are largely responsible for driving this trend. Non-traditional investors participated in deals totaling $50.3 billion over the first three quarters of 2018, reaching a new annual high.
These deep-pocketed investors are helping fuel the capital availability that is allowing startups to stay private longer. A year ago, I noted that sovereign investors were on the hunt for unicorns. Since 2012, the number of SWF-funded tech deals has grown by 38% and now represents 27% of total deal flow.
“Once regarded mostly as sources of money for professional money managers, sovereign funds have matured into ambitious investors,” reads a New York Times article published yesterday. “They have stocked their ranks with experienced dealmakers and are searching for opportunities to strike their own deals.”
It's worth noting that the taboo around taking money from SWFs has largely gone away. Sovereigns were long criticized for their inexperience in high-growth scaling and lack of expertise in the tech sector, but now most of them are considered to be on par with some of the leading traditional global VC funds.
“They’ve evolved into becoming more direct investors,” Michael Maduell, the president of the Sovereign Wealth Fund Institute, told the NYT. “They are competing more against the Carlyles and the Blackstones of the world.”
Crazy what a few years and a few (very large) checks from Saudi Arabia’s Public Investment Fund can do.
TUNE IN TOMORROW: Tomorrow, I’ll publish a Q&A with one of Goop’s earliest investors for Term Sheet’s ‘5 Qs with a Dealmaker’ series. In preparation, I encourage you to read this superb profile of Goop mastermind Gwyneth Paltrow.
THE LATEST FROM FORTUNE...
• Why Arielle Zuckerberg and Y Combinator's Jessica Livingston Invested in This Coding Startup (by Emma Hinchliffe)
• Marc Benioff Is Backing a Bill to Fight Homelessness in San Francisco (by Hallie Detrick)
• Google Passes on a $10 Billion Pentagon Cloud Contract, Citing Its New AI Principles (by Hallie Detrick)
•Musk Honors Pledge, Donates Cash to Bring Clean Water to Flint, Michigan Schools (by Glenn Fleishman)
Microsoft invests in Grab as ride hailer adopts Azure platform. Time Magazine releases its ‘50 Most Genius Companies’ list. Forbes is trying out the blockchain. Hope Hicks to lead communications for Fox News.
• TidalScale, a Campbell, Calif.-based developer of software for in-memory applications, raised $24 million in Series B funding. Investors include Bain Capital Ventures, Hummer Winblad, Sapphire Ventures, Infosys, and SK Hynix.
• Sphingotec, a Germany-based diagnostics company, raised 20 million euros ($22.8 million) in funding. HBM and Wellington Partners led the round.
• Kitchen United, a Pasadena, Calif.-based virtual restaurant concept, raised $10 million in Series A funding. GV led the round.
• Frontify, a Switzerland-based startup building a brand management platform, raised $8.3 million million in Series A funding. Blossom Capital led the round.
• Goodlord, a U.K.-based property technology company, raised 7 million pounds ($9.1 million) in Series B funding. Finch Capital led the round, and was joined by investors including Rocket Internet and Global Founders Capital.
PRIVATE EQUITY DEALS
• Align Capital Partners recapitalized iPROMOTEu, a Wayland, Mass.-based tech-enabled business process outsourcing provider to the promotional products industry. Financial terms weren't disclosed.
• Cairngorm Capital Partners LLP acquired Helix Tool Co Ltd, a U.K.-based cutting tools specialist. Financial terms weren't disclosed.
• New Water Capital LP invested in The Perfect Bite Co, a Glendale, Calif.-based developer of recipes and products for national grocery brands. Financial terms weren't disclosed.
• Cairngorm Capital Partners acquired Helix Tool Company Limited, an independent cutting tools specialist. Financial terms weren't disclosed.
• Volkswagen is close to hiring Citigroup, Deutsche Bank, Goldman Sachs, and JP Morgan to help with the potential stock market listing of its truck unit Traton. Read more.
• Bain Capital Private Equity agreed to acquire a majority stake in Rocket Software, a Waltham, Mass.-based provider of enterprise modernization and optimization solutions. The value of the deal is about $2 billion. Rocket Software is currently owned by Court Square Capital Partners.
• Ardian agreed to sell ADA International, a European maker of hotel cosmetics, to Moonlake Capital. Financial terms weren't disclosed.
• RLJ Equity Partners LLC acquired a majority stake in Crossfuze, a Buffalo, N.Y.-based, enterprises services company, from Palladian Capital Partners. Financial terms weren't disclosed.
• H.I.G. Capital agreed to sell its stake in FNZ, a U.K.-based platform-as-a-service provider, to Caisse de Depot et Placement du Quebec and Generation Investment Management LLP. The deal was valued at 1.65 billion pounds ($2.15 billion).
• Industrial Opportunity Partners sold Alexandria Moulding, a Moxee, Wash.-based supplier of moldings and related millwork, to U.S. Lumber Group. Financial terms weren't disclosed.
FIRMS + FUNDS
• Former NEA general partner Jon Sakoda filed to raise a $500 million venture-capital fund under the name Catalyst Labs Fund I. Sakoda said he would be leaving NEA after 12 years. He is no longer listed on the NEA site. Sakoda is heading up a new venture fund at Cisco Systems, according to the WSJ.
• Commonfund Capital, a Wilton, Conn.-based private equity and venture firm, raised $432 million for its 12th venture fund, Commonfund Capital Venture Partners XII.
• Dan Robinson joined CIFC as Chief Investment Officer, Europe.