Investors closed out 2016 with a whimper, as both deal volume and dollars invested hit an 8-quarter low in Q4 with $21B invested across fewer than 2,000 deals. Though a few markets and verticals bucked this trend over the year, our 2016 MoneyTree Report in partnership with PwC shows that the total amount of capital invested was down vs 2015.
A record number of unicorns — companies valued at over a billion dollars — were created in 2015, but it seems VCs were playing it safer in 2016 thanks to a soft IPO market and rationalization of market valuations. Fewer unicorns were born last year than in the year prior.
The slowdown in overall investing and unicorn births aside, the downturn wasn’t universal. Europe beat the slump in Q4 with an overall increase in dollars invested, including a whopping 100+% jump in funding to healthcare startups, and a 27% uptick in deals to mobile companies. Corporates in Europe also took a bolder tack, reaching a five-quarter investment high that saw them active in 25% of all deals.
The picture wasn’t as rosy in Asia, where activity continued to stall both in terms of number of deals and dollars invested. Funding dropped to just $5.5B in Q4, over just 337 deals. It was the third quarter in a row below 400 deals. Almost every major sector suffered over Q4, with internet companies hit hardest with a 43% drop in funding. The one bright spot was an increase in total investment into non-internet/mobile software companies, which jumped by 178%. This was thanks mainly to a $120M Series B to computer vision developer SenseTime.
North America, usually buoyed by the US’s vibrant tech center, was not immune to this global slowdown in VC investing, seeing a 15% slowdown in Q4 vs Q3. It was also the first quarter since Q1’14 that total funding to US companies dropped below $13B. Canada, however, was home to a 49% increase in funding over the same period. Shrinking markets in North America included the historically robust internet and healthcare sector, while mobile ended the year with a 10% boost in deal volume vs. Q3.
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