CB Insights released its Q1′ 16 Venture Pulse, a publication that provides an overview of the global VC activity. Here are some of the most relevant insights:
a) Investors behaved cautiously during this period because several factors fostering uncertainty in the market (i.e. UK referendum, US presidential elections, etc.) and skepticism of high valuations (Unicorns?).
b) As a consequence, the Global VC activity was lower (both number of deals and total capital invested) than the previous quarter and even than Q2′ 15.
c) Asia had its deepest drop in both its number of deals and its activity, falling to less than half of its highest record in Q3’15 ($14.3 bn).
d) Europe and North America had a slight increase in capital invested. In Europe, thanks to the massive $1 bn funding of Spotify, the size ($) of the VC activity was maintained compared with previous quarters (≈$3.5 bn); however, the number of deals declined. In North America, happened exactly the same phenomenon: a slight increase in total activity value and a drop in the number of deals closed.
e) Globally, many VC funds raised a significant amount of capital during this quarter. This money must be invested in the next few quarters which, in theory, would worsen the VC crisis described by Bill Gurley as the industry would have more funds to invest and not so many opportunities to exit (at high valuations).
f) Investors became more critical of potential investments. During this quarter, investors focused more on signals of profitability (revenue creation, positive gross margins, positive unit economics and expenses control) than “growth-and-only-growth” signals.
g) After some Unicorns either shut down or reduced significantly their valuations, investors were hesitant to support high valuations and mega-deals. Those few mega-deals closed were made with strong guarantees and protections for investors (i.e. Spotify).
h) Corporate VCs increased their activity.
For more information:Venture Pulse Q1 2016 from CB Insights.
Also published on Medium.