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Useful Stats: Contraction of VC investing continues

April 06, 2017
By: Mark Skinner

The number of companies receiving venture capital investments during the first quarter of 2017 dropped 24 percent compared to a year ago, according to the latest NVCA-Pitchbook Venture Capital Monitor, released Tuesday.  Venture capitalists also parted with 12 percent less money during the quarter, suggesting to the report’s authors that 2017 is on pace to compare to 2013 levels.

Deal closings have declined each of the past seven quarters, with all stages seeing drops except late VC, which experienced a slight uptick for the first three months of 2017. Angel and seed funding felt the sharpest percentage declines over the past two years. The number of angel deals fell to 827, a drop of 62 percent compared to one year ago. Note: Pitchbook does not include accelerator program figures in the counts.

Despite the decrease in overall activity, VC managers had no problem raising funds last year, massing the largest pool ever of dry powder, capital available for future investment. Perhaps not unexpected with so much cash available and so few deals being closed, the survey found median early stage VC deal sizes jump from $5 million to $5.5 million.  However, later stage VC remains hard to capture as the total invested in these deals dropped 18 percent from a year ago.  The authors suggest as a possible explanation “it isn’t because of a lack of capital or quality targets. Investors have simply become more rational throughout the industry, pulling back on deals but staying active and engaged with the right opportunities.”

It remains to be seen if future returns match this thinking because presently, exit opportunities remain soft. Exit activity has dropped for each of the past four quarters and six of the past eight, the survey found.  First quarter aggregate exit values, however, were $14.9 billion, which, if it were to hold, would yield the second highest annual total in a decade.

Geographically, the distribution of VC appears to be slightly less concentrated. Silicon Valley captured 38 percent of the quarter’s total activity, compared to 42 percent in 2016.  The Monitor authors contend high labor costs in the biggest markets and increasing talent elsewhere in the country is driving the redistribution. Another theory the authors offered is that fund managers may be looking more at global opportunities than investors did previously.

 

Useful Stats: Q1 Deals by State

The Pitchbook-NVCA Venture Monitor for First Quarter 2017 presents the distribution of deals closed during the quarter by state.  SSTI has prepared the accompanying table and map showing the percentage of the 1,808 deals captured by 47 states and the District of Columbia. Fifty percent of the deals went to companies in three states: California, New York and Massachusetts.

 

venture capital, useful stats