As competition increases within the venture capital industry to fund the next Google or Uber, the most highly desirable startups often have multiple investment offers and must decide upon the best. There are several factors that can affect evaluation of potential equity investors. For many startups, the decision may focus solely on the terms of the deal.

U.S. venture capital investment hit $48.3 billion in 2014, its highest level since 2000, according to data from the National Venture Capital Association (NVCA) and PricewaterhouseCoopers (PwC). Investments jumped 61 percent over the previous year in terms of dollars. Deals were up as well, but by a more modest 4 percent to 4,356 deals in 2014, indicating the growth of deal size and the presence of a number of “megadeals.” NVCA also noted that investments were dispersed throughout the country, with 160 U.S. metros receiving some venture capital.

The first wave of year-end 2014 data on U.S. venture investment painted a portrait of a resurgent capital market. Investment activity reached its highest level of activity in a decade, finally shaking off the stagnation of the Great Recession (see last week’s article). Within the data, however, there were some concerning trends.

California-based companies received about 56 percent of all U.S. venture capital dollars in 2014, the state's highest share of venture activity since the dot com boom of the early 2000s. Over the past 15 years, investment activity has steadily become more concentrated in California and a few other states. In 2009, about 67 percent of all deals and 74 percent of venture capital dollars flowed to the top five states. By 2014, those states' share of venture dollars grew to 80 percent, according to NVCA/Pricewaterhouse Coopers data.

In partnership with several major pharmaceutical companies, the United Kingdom’s (UK) Secretary of Health Jeremy Hunt announced the creation of the $100 million Dementia Discovery Fund. The UK government-led venture fund will support innovative research across the globe to help find new ways to prevent and treat dementia and Alzheimer’s disease. Private sector partners that already have agreed to invest in the project include Biogen, GlaxoSmithKline, Johnson & Johnson, Lilly and Pfizer.

Only 17 companies had initial public offerings (IPOs) in the first quarter of 2015, the lowest number since the beginning of 2013, according to data from Thomson Reuters and the National Venture Capital Association (NVCA). This is a significant drop from the 37 IPO exits in the first quarter of 2014. Mergers and acquisitions (M&A) were also down, with 86 exits, compared to 115 in Q1 2014. While 2014 was an unusually active time for venture-backed exits, the current data appears to be a return to recession-era levels of deals and disclosed values.

Two 2017 Q3 venture capital market updates are not providing much clarity on the underlying state of the industry. Data on greater uninvested capital, larger deals and fewer exits, among other indicators, suggest that venture capital is in need of a market correction. At the same time, new fundraising, a move toward wider geographic distribution and the rise of alternative financial structures could speak toward the emergence of a more sophisticated market. In the absence of decisive indicators, the data allow for any number of explanations and predictions.

Bloomberg’s U.S. Startups Barometer for August 21, 2017 highlights an environment ripe for startups to attract venture capital (VC). The weekly index tracks the overall health of the business environment for private technology companies based in the U.S. Driven by the number of VC financing deals, the barometer set a new record high for the second consecutive week with a nearly 65 percent increase from last year’s index score.

Through the third quarter of 2017, the venture capital market saw an average deal that invested more money into larger and older companies than in prior years. With fewer exits and deals occurring throughout the industry — as well as a historic $90+ billion in uninvested capital (aka “dry powder”) — a reasonable expectation might be that funds would have a difficult time raising capital.

The U.S. Department of Treasury released its final annual report for the State Small Business Credit Initiative (SSBCI), which provided funding to states for lending and investment programs. “Venture capital” programs, often structured for pre-seed (13 percent of funds), seed (27 percent) or early stage (45 percent) investments, attracted $4.2 billion in immediate private financing against $327 million in federal dollars.

In the lead-up to the Biotechnology Innovation Organization’s (BIO) International Convention held this week, the organization released a series of reports on the health of the industry. Collectively, the reports indicate that the bioscience industry is seeing greater employment with better wages, increasing venture investment, but university and federal funding, patent filings and clinical trial success are leveling off or decreasing.

A spate of recent news challenges many common perceptions of venture capital. Academic researchers have identified critical shortcomings with widely used industry data. Major investors have revealed smaller than anticipated returns. An analysis of thousands of investments indicates fund success requires superstar deals of well more than 10x. These articles should drive new evaluations of public policy and programs to support early stage capital.

After an extremely strong venture capital market in 2015, the industry seems to show the signs of a decline driven by both cautious and fatigued investors. Three recent studies from Pitchbook and CB Insights indicate that there are several reasons why venture capital firms and other investors have been more cautious so far in 2016 including: mixed economic growth numbers; a volatile political climate; and, more security in private markets.

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.