Dollar funding rises 15% and deal activity ticks up 2% from Q4 2016, with investment still lower than the peak levels seen in mid-2015.
NEW YORK, April 12, 2017 – After ending 2016 on a weak note, investment in VC-backed companies based in the United States climbed in the first quarter, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and CB Insights.
In Q1 2017, investors deployed $13.9 billion to US VC-backed startup companies across 1,104 deals, up 15% in dollars and 2% in deals from Q4 2016. These figures represent a slight recovery from Q4 2016, where startup investment figures bottomed out as part of an ongoing retreat from the peaks of 2015. A boost in mega-round activity contributed to the jump in quarterly dollars, although the total of $13.9 billion remains the second-lowest quarterly total across the past two years.
“We are starting to see a rise in VC investments after the lowest level of investing in the last two years, with later series deals supporting broad anticipation of increased exit activity,” said Tom Ciccolella, US Venture Capital Leader at PwC. “US megadeals rose to 17 during Q1, up from only 12 the previous quarter. While some of the larger financings included familiar late stage names, an unusual feature was that several hardware-focused startups received financings of more than $100M, including in areas such as the internet of things and autotech.”
Regional trends were mixed, with LA/Orange County being one of the few major hubs seeing an uptick in both deals and dollars from Q4 2016. Silicon Valley (South Bay Area) deal activity was essentially flat from the previous quarter, while San Francisco (North Bay Area) deals fell to an eight-quarter low.
Globally, funding trends directionally tracked US investment with total dollars rising 21% from Q4 2016 lows to $27.1 billion, while deals crept up 2% to 2,228. Like the US, Asia’s funding total was lifted by a spike in mega-rounds of $100 million or more, while Europe saw deal activity rising for the fifth consecutive quarter.
“We are seeing the US funding environment slip into its new normal. 2015 was irrationally exuberant and the 2016 pullback was a reaction to that," stated Anand Sanwal, co-founder and CEO of CB Insights. "However, 2016 was more of a soft landing than a wholesale popping of the venture bubble which pundits have been predicting since 2009. There continue to be new sources of capital and strong corporate interest, and that is evident in the Q1 numbers. A number of large acquisitions and some early IPO activity also portends good things for VC-backed companies.”
Key Q1 2017 highlights:
MoneyTree Report results are available online at www.pwcmoneytree.com.
CB Insights research can be found online here.
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