As every quarter here are the highlights of the Venture Pulse Q3 2016 CB Insights Report, which tracks the global VC activity each quarter (check the full report here).
- Global funding drops: After the Q4’15 drop in VC funding, the global VC market had been stable between $27 bn-$28 bn funding per quarter. Q3’16 saw $24.1 bn in funding; the lowest amount registered since Q3’14. This is a direct consequence of all regions behavior; all regional VC markets decreased their amount of funding in Q3 as no mega-rounds happened compared to Q2’16.
- Deals number was steady: After Q4’15, global deals activity seems to have stabilized around the new normal. Q3 saw 1983 deals, just a slight increase vs Q2. US & Asia regions saw a decrease in activity, while only Europe saw a consistent increase in the number of deals driven by seed deals.
- Mixed feelings about seed deals: In US (26% vs 29%) and Asia (29% vs 40%) seed deals share of total deals decreased in Q3 vs Q2. Meanwhile, Europe was the only region showing an opposite trend; since Q1’16 seed deals have increased its share of total deals achieving a consistent 48% share.
- Unicorns births were scarce: It is not 2015 anymore guys! In Q3 only eight companies joined the unicorn club; 4 in US and 4 in Asia. Europe did not see any unicorn newborn this quarter.
- Corporates deal share continued to accelerate: This was the 5th quarter in which we (Corporates and CVC) accelerated our deal share achieving 28% share. Asia drove this trend as 45% of the deals closed in Q3 in this region had a corporate investor (extra: main corporate investors in Asia are Tencent and Intel Capital).
- IPOs started to resurface: after Twilio´s IPO in Q2’16, other companies got interested in going public in Q3 such as Apptio and Trade Desk. Before knowing that Donald Trump is the new president elected in the US, the trend showed a high chance of seeing more IPOs in the next quarters. Now, we will have to see (tech companies shares have decreased in the last week).
- Internet and mobile were the two favorite sectors to invest in: once again deals in these two sectors were more in number (66%).
US sees activity and funding dollars fall in Q3
- Deals (-2%) and funding (-18%) dropped compared to the previous quarter. However, this region is still the biggest VC ecosystem in the world with 1067 deals and $14 bn funding in Q3.
- Median later-stage deal size decreased to $22.4 m (-34% vs Q3’15), while median early-stage size remained steady in $3 m (well above that of Europe and Asia).
Europe’s deal activity raises but funding drops below $2.5 bn
- Europe was the only region showing since last quarter a mixed result: deal count raising while funding dollars decreasing. EU total funding was $2.3 bn across 468 deals.
- Seed-stage deals represented 48% of the total deals of the quarter. As consequence, the early-stage median deal size dropped.
- UK deal number and total funding increased to $834 m across 110 deals (both numbers higher than Q4’15). Meanwhile, funding in German VC-backed startups increased for second consecutive time to $509 m across 76 deals.
Asia slowdown continues
- Both the number of deals and funding kept declining in Asia. This is the fourth quarter that this market sees this trend. Total funding was $7.2 bn (-3% vs Q2’16) across 323 deals (-5% vs Q2’16).
- Q3’16 saw a sharp decline from 40% to 29% in deal share of seed deals.
Note: Because the current social and political uncertainty in the US, the impact in the tech community of Donald Trump´s migration reforms, we would probably see less VC activity in the US in the final quarter of the year. On the other hand, VC activity in the UK might also be affected by the uncertainty of the Brexit resolution. Let´s see. I just want to remind you that this just happened:
Also published on Medium.