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Companies Receiving VC Funding Declined for 5th Straight Quarter, Report Finds
While the number of companies receiving venture capital (VC) backing continues to decline, the amount of money invested remains near record levels. As of Q3, the annual investment total for 2016 is approximately $56 billion invested across 6,000 companies. However, with only 1,800 deals made in Q3, this marks the fifth straight quarterly decline in the number of companies receiving venture investment – a 32 percent quarter-over-quarter decline. Yet, nearly 2,000 investors deployed close to $15 billion in VC financing during Q3 2016, according to the inaugural PitchBook-NVCA Venture Monitor – a quarterly report on U.S. venture capital activity.
If this pace continues, the report finds that 2016 would be the second-highest amount of capital invested during a calendar year – last year’s $78.9 billion is the current highest year for capital invested. These findings indicate the continuation of a strong concentration of investments into older-stage unicorns (companies valued at $1 billion or more).
Driven by a low interest-rate environment, investors continue to make large investments in VC firms seeking high returns on investment. So far in 2016, VC firms have raised $32.4 billion across 201 vehicles, putting 2016 on pace to be a record-breaking year in terms of total capital raised, according to the report. These findings indicate that the near-record annual highs in total amount invested may continue for the foreseeable future, especially if VC-backed exit trends continue.
While companies are eschewing initial public offerings (IPOs), VC-backed companies have provided investors with lucrative exits through strategic acquisitions and buyouts. The authors highlight that approximately 91 percent of all exits so far in 2016 were through strategic acquisitions or buyouts, with a disclosed median exit of $100 million per company. Additional findings in the report include:
- VC investment activity by round size;
- VC investment activity by stage (Angel & Seed, Early and Late);
- VC investment activity by first financings, sector and median size;
- Exits by type, size & sector; and,
- Fundraising by size & first time funds.