US Early-Stage Tech Report: Activity Ticks Up, But Funding Drops To Two-Year Low

Early-stage US tech deals (seed/angel and Series A) bounced back in March to 344, up from 261 in February. In all, there were only 886 early-stage tech deals in Q1’16, compared to 899 in Q1’15, and 1,215 in Q1’14.

Our analysis includes all equity funding rounds and convertible notes.

March 2016: $548M invested across 344 deals

Funding continued to fall for the second-consecutive month, reaching the lowest monthly dollar amount in two years and down 27% from February. Some of the largest early-stage rounds in March included Series A rounds raised by search engine company AlphaSense ($33M) and software startup Cockroach Labs ($20M).

Early-stage deals were up 32% in March from the previous month. Total deals reached an 8-quarter high.

Deals uptick in Q1’16

Deals were up 16% in Q1’16 compared to the previous quarter, after dropping to an eight-quarter low in Q4’15. But deal volume in Q1’16 was still down 27%compared to what was seen in Q1’14.

Median deals size drops 30% from February

Median early-stage deal size dropped to $2.1M in March, from $3M in February. There were around 60 $3M+ (seed/angel and Series A) deals in March, compared to over 80 such deals in February. The median early-stage tech deal size seen in March was the lowest since October 2015.

After peaking at $4.94M in January 2016, average deal size dropped for the second-consecutive month. Mean deal size in March was just $3.61M, the lowest monthly average size since August 2015, compared to $4.75M in February, consistent with the drop in total funding dollars and the increase in deals.

Seed deal size tumbles after reaching two-year high

Both mean and median seed deal sizes dropped in March to within a more typical range after reaching a two-year high the previous month. There were over 20 $3M+seed rounds in February 2016 (among the disclosed rounds), compared to just over 10 in March.

Average Series A deal size drops 23%

The average Series A deal size, which was on an upward trend this year, after falling in Q4’15, tumbled again in March to $6M. The largest Series A deal was the previously-mentioned $33M raised AlphaSense. In February, the largest Series A deal was a $45M round, which was raised by biomedical data analysis company Seven Bridges.

Deals in consumer products & services sees growth

Internet deals dominated deal share across all the months. Mobile and telecom deal share, which reached a two-year low of 18% in January 2016, bounced back and remained at 23% in both February and March.

The consumer products & services sector reached 5% deal share.

Internet, mobile dollar shares drop

Both internet and mobile & telecommunications dollar shares dropped by 6 percentage points each. Consumer products & services saw growth in terms of dollar share as well, reaching a new high at 10% in March, pushed by a couple of large deals including a $16M Series A to wearable company LifeBEAM and a $11M Series A to eye-tracking VR headset developer, Fove.

Largest early-stage tech deals in March

The previously-mentioned Series A rounds raised by AlphaSense (backed by Triangle Peak Partners, Tribeca Venture Partners) and Cockroach Labs (Benchmark Capital, FirstMark Capital, Google Ventures, Index Ventures, Sequoia Capital) were the top two tech deals in March. The rankings below are based on equity funding rounds raised.

Most active investors

Innovation Works, which backed companies including The Efficiency Network and Covey; along with 500 Startups, which backed companies including Comparably and Tinkergarten, were the most active early-stage investors in March,

Tech companies with highest momentum 

We used CB Insights Mosaic algorithm to identify 20 early-stage companies with the highest momentum scores — a measure of a company’s traction based on social and news mentions, web traffic and jobs data, among other factors.

The full list is available to CB Insights customers under the Research tab