Are Mega-Deals the New Normal — or a Bubble Soon to Pop?: Term Sheet

This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.

Mega-deals are on pace to set a new record high in 2019. 

Deal value is set to surpass $100 billion for the second
year in a row, according to a
new PitchBook-NVCA report.
A total of 185 mega-deals (defined as $100
million or more) have been closed so far this year, which is nearing 2018’s
full-year total. Total venture capital investment has reached $96.7 billion
through the first three quarters.

You should keep in mind that it’s no small feat to surpass
2018’s insanity. I called 2018 “the year of
the mega-round
” because it felt like there was a company raising a
mega-round every other day. Last July set an all-time record for the number of
$100 million+ venture deals struck in a single month. And then remember December
18, 2008
, when five companies raised $100M+ rounds in a single day?

The mentality at that time: capital can act as a
differentiator. Armed with a war chest of funding, startups could attract more
talent, acquire smaller players, market aggressively, capture customers, and
blow past their rivals. With so much money out there, if you didn’t take it,
your competitor certainly would.

So naturally, in 2019, Term Sheet readers and venture
investors were expecting to see a cooling of the markets. One reader
wrote
: “The relative youth of the tech sector has been an essential part of
its decades-long dominance. But in 2019, it is possible that many burgeoning
entrepreneurs, investors, and employees in the tech sector will see for the
first time what life is like through a recession.”

Yeah, that didn’t happen. Sorry to burst your bubble (pun
intended). 

Instead, new unicorn companies are being minted nearly every
day (see deal section below) and valuations continue to skyrocket. Nineteen
companies reached unicorn status in the third quarter of 2019, following 20 in
the previous quarter, according to a
report from KPMG
. Even though there have been whispers of a looming
recession, there’s no question that capital is still abundant. The money is
flowin’ and the champagne is poppin’.

I interviewed Romulus Capital founder Krishna Gupta several
years ago, and he
told me
we’re living in an insatiable time (it’s gotten even more
insatiable since then). 

Gupta launched his firm in 2008, when venture capital looked
very, very different. The talent was more clustered and the valuations were
more realistic. He used the following example: In 2008, founders went out to
raise $2 million and ended up raising only $500,000. Today, they go out to
raise $2 million, and it’s not uncommon for them to end up with $5
million. 

“The most important thing for founders to know,” he
said, “is that this won’t last forever.”

… Well, unless SoftBank raises a second Vision Fund. 

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