Jan 20, 2016
From the Global Enterprise Institute
Welcome to the Q4 2015 edition of the Venture Pulse report. The 3rd edition of the report leverages global data from CB Insights, as well as analysis and regional perspectives from KPMG Enterprise, to provide you with the trends in venture capital investments and help you make informed business decisions.
THE GLOBAL VIEW
After a record-setting year for Unicorns, mega-rounds, and tech bubble chatter in 2015 ($128.5 billion invested into VC-backed companies, a 44 percent jump compared to 2014), overall market concerns around valuations, burn rates, and over-funding put the brakes on investment in VC-backed companies in Q4’15. Q4 saw US$27.2 billion invested across 1,742 deals globally marking a 30 percent drop off in funding - the lowest quarterly deal activity since Q1’13.
For more details on the trends in global venture investment activity,
For an in-depth look at the North America perspective,
TRENDS IN NORTH AMERICA
North America experienced a dramatic slowdown in VC activity as investors grew more cautious. Total venture capital investment in North America dropped from $20.8 billion in Q3 to $14.1 billion in Q4 – the lowest total in the past 6 quarters. In the US, several mutual funds marked down a number of startup valuations related to ‘Unicorn’ companies – no doubt prompting more scrutiny of additional VC investment activities.
A significant decrease in the number and value of mega-rounds in the region had a significant impact on Q4 results. Overall, the number of mega-rounds ($100 million+) decreased from 39 in Q3 to just 18 in Q4, by far the lowest total over the past year. During Q3’15, several rounds went over $1 billion (i.e., Uber and Social Finance), while Q4’s largest rounds included Jet.com ($500 million), Sunnova Energy Corp ($300 million), and Tenable Network Security ($250 million).
The ten largest rounds of Q4’15 totaled over $2.7 billion, nearly 20% of funding in North America (check out the Venture Pulse North America Report for the details).
THE OUTLOOK FOR 2016 IN NORTH AMERICA
With a number of IPOs failing to live up to their private sector valuations, investors may start to question the model of keeping companies private over the longer term. In 2016, IPO and M&A activities may rebound as the large inventory of companies that can and should go public start to make their moves.