On-demand investment activity continues to decline in Q1'17, even amongst several large deals.
Despite several recent and large deals to companies such as Instacart, Olacabs, and Airbnb, the on-demand category has continued to face strong headwinds in Q1’17 after a sluggish end to 2016.
For the second quarter in a row, both deal and dollar funding activity to the sector has declined. The on-demand sector raised approximately $1.6B over 50 deals in Q1’17, which amounted to the lowest quarter in both funding and deal terms since Q1’14.
In comparison, less than a year ago, on-demand startups raised $6.6B over 72 deals (albeit due to mega-rounds to Uber and Didi Chuxing). That’s a far cry from Q3’15, when the space raised $9.1B across 120 deals, at the height of investor interest into on-demand startups.
Using CB Insights data, we analyzed funding trends from 2012 through Q1’17 in the on-demand space. We define the on-demand category as private companies that aggregate demand on mobile devices and applications, enabling near-instant access to a wide variety of offline services.
Quarterly financing history
Q1’17 represented second quarter of consecutive decline in deal activity, and the third-consecutive quarter of decline in overall funding to the on-demand space. Despite a disappointing level of investor activity in the most recent quarter, several companies such as Instacart, Olacabs, and Airbnb (as mentioned above) raised considerable levels of funding this quarter.
Taking a closer look, Instacart raised $400M as part of a Series D round in March 2017 from prominent investors such as Sequoia Capital, Andreessen Horowitz, Khosla Ventures, and Y Combinator. The new round increased Instacart’s valuation to $3.42B. This round of funding comes more than two years after the company’s Series C round of funding, in which the startup received $220M at a valuation of $2.11B. With a decline in new entrants, and an increase in consolidation in the food delivery space (among the biggest segments for on-demand), it would not be unusual to see more well-funded players such as Instacart acquire smaller food delivery startups with less funding.
Other large deals of Q1’17 included a $448M Series E+ round of funding to Airbnb from investors such as the China Investment Corporation, as well a $330M Series E+ round of funding to India-based Olacabs from investor Softbank Group. The top three deals of Q1’17 to Instacart, Airbnb, and Olacabs (all mentioned above) accounted for 74% of total dollar funding for the quarter.
Deal share by quarter
Taking a look at on-demand global deal share by quarter, we can see a general decline of seed and angel deals to the space, decreasing from 49% of all deals in Q1’16 to only 38% of deals in Q1’17. That points to less new entrants entering the space as startups die, and some spaces, like food delivery, see consolidation.
Although the percentage of later-stage deal share (Series D and Series E+) remained stagnant between Q4’16 and Q1’17, we know that later-stage deals comprised the majority of dollar share for the quarter, given the deals to Airbnb, Ola, and Instacart. Interestingly, the proportion of Series A deals in the space increased from 7% of deals in Q4’16, to 20% of deals in Q1’17. Some of the largest Q1’17 Series A deals in the on-demand space included a $27M round of funding to Japan-based food-delivery startup Dely, as well as a $13M round of funding to US-based restaurant reservation platform Resy.
Want more data on the on-demand startup space? Log in to CB Insights or sign up for free below.
This report was created with data from CB Insights’ emerging technology insights platform, which offers clarity into emerging tech and new business strategies through tools like:
- Earnings Transcripts Search Engine & Analytics to get an information edge on competitors’ and incumbents’ strategies
- Patent Analytics to see where innovation is happening next
- Company Mosaic Scores to evaluate startup health, based on our National Science Foundation-backed algorithm
- Business Relationships to quickly see a company’s competitors, partners, and more
- Market Sizing Tools to visualize market growth and spot the next big opportunity