The Venture Pulse Report, Q3 2016
KPMG and CB Insights' Q3 2016 VC report highlights the latest trends in venture capital funding globally.
After a furious check-writing phase through early-to-mid 2015, investors in VC-backed companies remain cautious in 2016, as major economies continue to face economic uncertainty and startup companies experience a difficult exit environment.
Q3 2016 saw USD$24.1 billion invested across 1,983 deals globally, representing a very slight deal increase from Q2 2016, but a 14 percent decline in total quarterly funding. Although the deal volume is still quite healthy by pre-2014 standards, this was the lowest quarter of funding since Q3 2014.
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After $100M+ checks flowed freely to VC-backed companies through much of 2015, the mega-round trend has settled into a lower range through 2016. North America saw just one more $100M+ than Q2’16, while Asia held steady at 17. Meanwhile, Europe saw just a single mega-round in Deliveroo’s $275M Series E.
Corporations have steadily ramped up their private markets activity, as more large players are either establishing CVC arms or investing directly in VC-backed companies. Q3’16 was no exception, with corporates and CVCs participating in 28% of all deals, a 5-quarter high.
From a high of 25 new unicorns in Q3’15, 2016 has yet to see a quarter with double-digit new entrants into the unicorn club. Q3’16 saw eight newly-minted billion dollar companies including, Compass, Unity Technologies, and OfferUp.
Mega-round activity to VC-backed companies has seen a reset
Global corporate deal share continues to accelerate
Number of new unicorns remains in single digits
Deal count rises in Europe while dollars invested fall below $3B
After 2 quarters of declining deal activity through Q1’16, the past 2 quarters have seen an increase in deal activity with Q3’16 reaching a new deal activity high. Funding, however, saw its second -consecutive quarter with less than $3B of investment, owing to a dearth of mega-rounds.
Deals to Asian VC-backed companies drop for the fourth-consecutive quarter
Deal activity has slowed down dramatically in Asia since it reached a peak of 437 deals in Q3’15. After 4 straight quarters of negative growth, Q3’16 saw just 323 deals, the lowest level since Q2’14 and a drop of 26% from Q3’15. Funding has seen 3 consecutive quarters below $7.5B, and was buoyed this quarter by deals into on-demand companies like Grab and Go-Jek.