New York, January 11, 2017 – Investment in VC-backed companies based in the United States ended the year on a weak note, as quarterly deals and dollars fell for the second-consecutive quarter, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and CB Insights.
In the US market, deals and dollars dropped 16% and 20%, respectively in 2016, compared to the previous year. Globally, the trend was similar, with global deals and dollars declining 10% and 23%, respectively in 2016, compared to full-year 2015.
In Q4 2016, investors deployed $11.7 billion to US VC-backed startup companies across 982 deals, down 17% in dollars and 14% in deals from Q3 2016. Both quarterly figures were also down from Q4 2015 and set the quarterly lows for 2016, which had already seen startup investment recede from the peaks of 2015. Deal activity, having fallen off consistently throughout the year, has now reached a multi-year low with the quarterly count failing to crack 1,000 deals for the first time since Q4 2011.
“Despite continued deceleration in venture capital investment activity, the startup ecosystem remains flush with quality deals,” said Tom Ciccolella, US Venture Capital Leader at PwC. “As industries continue to be disrupted by technology and Internet capabilities, new opportunities are emerging. It’s these opportunities, despite the decline, that continue to drive venture capital momentum.”
The US full-year funding total of $58.6 billion represented a 20% drop from 2015, while cumulative deals of 4520 fell 16%.
There were some bright spots in certain sectors and major US regions, with dollars up in New York metro and significantly up in DC/Metroplex. Funding to mobile companies was up 19% and dollars to artificial intelligence companies was up 16%.
“2016 served as a nice reset to 2015's exuberant funding environment," stated Anand Sanwal, co-founder and CEO of CB Insights. "But for those who predicted 2016 would be the popping of the venture bubble, it was not. Yes, it was a tougher year in terms of deal activity and funding, but versus 2014, which we can call a more normal period, 2016 compares quite favorably. In 2017, unicorns and mega-rounds could see some of the same headwinds as in 2016, but interestingly, the introduction of new big money investors from the likes of Asia and increasingly the Middle East may serve to offset that. An expected healthy IPO and M&A market should also serve to help the VC market as well."
MoneyTree Report results are available online at www.pwcmoneytree.com.
CB Insights research can be found online here.
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