Thanks to Uber, VC investment in unicorns sets $Multibillion record

Krista Gmelich, special to
Lukas Vering | EyeEm | Getty Images

Venture capitalists placed more bets on late-stage unicorns valued over $1 billion in the second quarter of this year, according to a report published by PitchBook. In fact, these companies received 39 percent of all venture capital during this period.

Investments in start-ups totaled $22.3 billion for the quarter, with unicorns receiving a record high of $8.8 billion.

The funding came at a time when some investors were concerned about things like slow IPO and M&A activity.

VC firms favor unicorn startups in Q2

In April, top venture capitalist Bill Gurley, a general partner at Benchmark, told CNBC that investing in unicorns had become a "substantially more dangerous and complicated practice."

But don't be fooled: One unicorn significantly boosted the results. Uber, the ride-sharing company with a $66.6 billion valuation, alone took nearly $5.6 billion from venture capitalists, more than 60 percent of the $8.8 billion that went toward all unicorns.

And a report out last month by British investment bank GP Bullhound showed that while U.S. start-ups are raising more capital, they're bringing in less revenue, at least when compared to their European counterparts.

The GP Bullhound report reveals, on average, U.S. unicorns are valued at 46 times their revenue, while European unicorns come in at an average of only 18 times.

When it comes to early-stage U.S. start-ups, however, raising capital through the second quarter was more difficult.

The decline in early-stage start-up funding has been dramatic, according to the PitchBook report. Seed-deal flow hit its lowest point in close to five years last quarter after declining steadily since the third quarter of 2014. There were just 554 completed deals last quarter, compared to 1,098 over the same period in 2014.

But Byron Deeter, a partner at Bessemer Venture Partners, said he thinks things will turn around for smaller firms. He also said he expects a pickup in tech IPOs after Labor Day.

Deeter's firm was the first and biggest investor in Twilio, a cloud communications PaaS company, the only tech unicorn to go public so far in 2016.

— By Krista Gmelich, special to