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Venture capitalists continue investing heavily in U.S. startups at levels not seen since the dot-com era. A new quarterly report from Crunchbase shows total dollars invested reaching $32 billion in Q3.

“We remain in the thick of a venture capital bull market and expect to finish 2018 with record amounts of capital raised by startup companies,” said Jeff Grabow, the U.S. venture capital leader at EY.

Overall deal volume is actually down, but total investment continues to rise in large part thanks to big later-stage deals, which accounted for 39 percent of last quarter’s investment. There were 63 “mega-rounds,” or those above $100 million, which was up from 49 in the previous quarter.

“The amount of capital available to companies is greater than we have ever seen,” Grabow said. “We are in a cash bubble and it can be argued that there is almost too much money chasing too few deals.”

Grabow added that this trend could create a “capital arms race,” with traditional VC funds raising big growth funds of their own. Recent IPO activity — venture-backed IPOs in 2018 (87) already exceed last year’s count (83) — will also “add fuel to the VC funding fire,” Grabow said, increasing the number of companies going public and providing liquidity for investors.

Crunchbase data shows healthcare leading all sectors last quarter with $7.6 billion invested, followed by IT and software. Geographically, companies located in the Bay Area, New York, and Boston regions accounted for 72 percent of venture dollars invested.

Grabow said that the VC market “is a long cycle and it takes time to adjust, unlike a public market.” He predicts that VC firms will continue to see strong results, driven by industry-wide investment themes (financial services, transportation, healthcare), the low cost of starting companies, and an abundance of available capital.

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