PwC / CBInsights: US VC Backed Deals Tank in Q4 of 2016

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In a discouraging sign, investment in venture capital backed companies tanked in Q4 of 2016. This is according to the PwC / CBInsights MoneyTree Report.

Both deals and dollars sagged, 16% and 20% respectively. The report said the global market experienced a similar decline with a 10% drop in deals and a 23% decline in dollars invested.

The total tally for Q4 2016 stood at $11.7 billion into 982 deals. These were quarterly lows for the year, a decline from both the year prior and Q3. PwC / CBInsights said that deal activity, fell consistently throughout the year and has now reached a multi-year low with the quarterly count failing to crack 1,000 deals for the first time since Q4 2011.  Ouch.

The decline was probably impacted by the swirling dynamics of the Presidential elections as well as ongoing Brexit concerns.

The authors attempted to put a positive spin on their numbers.

“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 funding total for the year stood at $58.6 billion. Bright spots were the New York City Metropolitan area and Washington, DC.

Anand Sanwal, co-founder and CEO of CB Insights, called 2016 a “nice reset.”

Additional bullet points include:

  • US mega-round activity (rounds over $100 million in size) hit a 5-quarter low in Q4, with 11 total compared to 15 in Q3 2016.
  • Four new unicorns, or private companies valued at $1B+, were minted in the US, equal to the figure from Q3 2016. This unicorn creation rate remains a fraction of what was seen in 2015, which peaked at 16 in Q3 2015.
  • All three of the major technology and startup hubs of Silicon Valley, New England (including Massachusetts), and New York Metro saw deal activity declining from the quarter prior. Silicon Valley-based companies saw the sharpest drop-off, with $3.9 billion invested across 310 deals, down 37% in dollars and 22% in deals from Q3 2016.
  • Canada saw a healthy funding jump of 49% from Q3 2016. Europe saw zero new VC-backed unicorns this quarter, but overall funding to the region rose 22% to 3 billion. Meanwhile, Asia financing dropped 25% to $5.5 billion.
  • Global VC-backed deals and dollars were also down from Q3 2016, with $21 billion allocated across 1,971 deals. The sub-2000 quarterly deal total was the first since Q4 2013.

Regarding Fintech investment, the largest financial service deals during Q4 included;

Payoneer, a provider of global mass payout services that accelerates growth for its customers by improving the way they make payouts to more than 200 countries in over 50 currencies worldwide, received $180 million in a later stage investment. Funding was lead by Susquehanna and Technology Ventures.

Stripe, an online payment system that just about every website uses, received $150 million led by capitalG, General Catalyst Partners, Google Ventures and Sequoia.

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