Global venture capital seizes up in the third quarter

by bold-lichterman

After an exceptional 2015, global venture capital should experience a sharp slowdown this year according to the study Venture Pulse Q3 2016 carried out by KPMG and CB Insights published on October 13. All sectors co-founded, the amounts invested on a global scale should indeed fall by 40% in the space of one year. The number of transactions carried out is expected to drop from 8,900 deals recorded in 2015 to 6,000 transactions in 2016. This is less than the number of investments made in 2012.


Amounts invested down 39% in the third quarter

The performance of venture capital in the third quarter largely confirms expert estimates. 24 billion dollars have in fact been invested in companies by venture capital firms worldwide, down 39% compared to the same period in 2015. This is the lowest level of investment recorded since two years, note the authors of the study.

The latter see this drop in investment as a signal of market stabilization. Brexit, as well as the prospect of the US election, would also be sources of uncertainty for investors. On the West Coast, some are starting to talk about the end of a bubble.

In terms of the number of transactions recorded, the third quarter of the year also marks a decline compared to the same period in 2015, but weaker. The 1,983 operations carried out over the period represent a drop of 16% compared to 2015. As a direct consequence, the average ticket is down.


Finally, if global activity is slowing down somewhat, corporate investments are on an upward trend. Corporate funds thus participated in 28% of transactions recorded over the period, against 24% for the same period in 2015.

Note, in the third quarter, more than half of investments (51%) concern Internet companies, and 15% mobile and telecommunications.

Increase in the number of operations in Europe

In terms of geographical distribution, the United States, with 14.4 billion dollars of investments (or 58% of the total) remains largely in the lead of the most attractive countries. It is still 30% less than the same period in 2015, and 18% less than in the second quarter of 2016.

In Europe, 468 fundraisers were identified by the authors of the study, for a total of $ 2.3 billion. While the number of announced transactions has increased since the start of 2016, the amounts invested are down slightly: -38% compared to the third quarter of 2015, and -21% compared to the second quarter of 2016. This the United Kingdom and Germany lead the most dynamic countries, with respectively 834 million dollars and 509 million dollars invested over the period.

Finally, in Asia too, investments are down sharply: a drop of 53% in the amounts invested compared to the same period in 2015, and of 28% in the number of transactions recorded.


Three times fewer new unicorns

Another observation of the authors of the study, in this context of global slowdown, the number of new unicorns being born is declining.

Where 25 new companies valued at more than a billion dollars “were born” in the third quarter of 2015, they are only 8 in the third quarter of 2016, or three times less. Since the start of the year, 11 new unicorns have been born across the Atlantic, 10 in Asia, and only one in Europe.


** Methodology: The study integrates data on investments made by venture capital companies around the world.

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