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CB Insights: VCs Pivot to More Realistic Valuations

October 20, 2016

Despite Brexit and political uncertainty in the U.S., stability is returning to the global VC market as investors shift from new unicorn chasing and a renewed interest in global initial private offerings (IPOs) by late-stage startups, according to a new report from CB InsightsVenture Pulse Q3 2016. CB Insights’ analysts contend that investor caution is the dominant VC market global trend driven by more realistic valuations of early stage companies, deals with a significant degree of scrutiny or investor protections, and some investors deciding to shelve their investments.

Although U.S. VC deals declined for the fifth straight quarter, the global market actually saw an increase in the number of deals finalized in Q3 2016. However, due to low unicorn birth rates and more realistic valuations, there also was a sharp decline in VC funding during Q3 2016 – the worst since Q3  2014. While quarterly funding to VC-backed companies has hovered around $27 billion to $28 billion since crashing in Q4 2015, the $24.1 billion invested in Q3 2016 is the lowest quarterly funding total since Q3 2014.

For early stage companies in the U.S. looking for Seed to Series A funding, CB Insights presents some discouraging news. Analysts found that Seed to Series A deal-share in North America fell to 49 percent of all VC deals companies, representing a five- quarter low. The current U.S. market is particularly difficult for seed stage funding. Median deal size, however, did remain consistent at $3 million per deal. Read the report…

venture capital