As every quarter, CB Insights released its Venture Pulse Report giving an overview of the global VC activity. Here are the main takeaways for this period:
Global Q2 2016 figures followed the same pattern as those of Q1 2016; funding increased slightly, while deal count continued to decline. The increase in activity value was a result of decacorns (private companies valued over $10 bn such as Uber, Snapchat & Didi Chuxing) raising funding rounds of more than $1 bn. The decrease in deals number is likely to be a consequence of market uncertainties associated with the Brexit referendum, the soon to be US presidential election, the Chinese economic slowdown and the potential increase in US interest rates.
This phenomenon of more money invested in startups but less number of deals closed was seen in all geographies (North America & Asia) except Europe, which presented an opposite trend.
Investors took a cautious approach
Instead of focusing on new investments, many investors used Q2 2016 to raise funds or to assess their current portfolio investments. Seems like investors are waiting until the uncertainties in the markets are cleared.
Proven companies do not have problems to raise more money
Experienced and proven companies (later stage deals) attracted most of the investment in North America & Asia. Only Europe continued to support significantly seed and early stage deals.
Regardless of the deal stage, all investors across the globe demonstrated not to be willing to invest in promising companies that are not well organized; since las quarter, investors are prioritizing those companies with a clear path to profitability, stronger business models, and moderate burn rates.
Late-stage investors demanded investor protections
The lack of ideal IPOs (maintaining companies’ private valuations in public markets), made late-stage investors ask for severe protections against downsizing rounds and IPOs to those entrepreneurs wanting to keep their valuations through Q2.
Only a few unicorns were born
Although some companies valued over $1 bn have recently lived tough times raising capital, others have survived. The only thing certain is that 2016 has not been the year of the unicorn as 2015 was; in H1 2016 only 12 VC-backed companies achieved +$1 bn valuations (7 in Q2 and 5 in Q1) compared with 36 in H1 2015.
Artificial Intelligence & Virtual Reality investments increased 🙂
In Q2 2016 investments in AI increased significantly surpassing high-profile sectors such as Digital Tech. AI investments have been constantly increasing in the last 5 years, probably because AI technology has applications in many verticals.
Virtual Reality was also a winner in this quarter after a number of VC investors and virtual reality companies announced the creation of The Virtual Reality Venture Capital Alliance, a $10 bn fund focused on virtual reality and augmented reality innovation. Expect to see a fast development of this sector. I am very, very excited!
Corporate VCs are participating more and more
In these two-quarters of 2016, Corporate VCs participated in 26% of the total deals. Companies continue to open their CVC arms and invest in private markets.
For more information, you can download the full report here: Q2 2016 Venture Pulse
Also published on Medium.