Global Trends in Venture Capital

Venture Capital (VC) is the cradle of new business formation, and taking the pulse of the VC industry provides important insights into economic vibrancy and the measure of “animal spirits.”

Each quarter, KPMG surveys venture capital activity to highlight the trends, opportunities and challenges in the VC market. Here are their top finding from their latest published report.*

Top 10 VC Trends

1. VC Investment Remains Healthy—Despite a year-over-year downturn in overall completed deals, total VC investment was substantial, with $127.4 billion invested worldwide in 2016.
2. Significant Decline in the U.S.—The amount of VC investment in the U.S. sank to $72 billion from its $82 billion level in 2015, while Europe declined much less—$2 billion, to $16 billion—and Asia stayed level at $39 billion.
3. Deal Size Stays High—Early funding—seed and series A—increased in size, though the size of later stage deals declined.
4. First-time Financings in U.S. Drop—The number of closed first-time funding slid 30 percent year-over-year.
5. Liquidity Tightens—Exits from VC investments in 2016 declined 26 percent by count and 13 percent by value, globally. The fourth quarter was the fifth consecutive quarter of declines in completed sales.
6. Corporate Participation Rises—Corporate VC participation increased to 15 percent of global deal count and $65 billion, up from 12 percent and $38 billion just two years ago.
7. Investors Become More Selective—Unlike 2015 where the urge to act was strong so as not to miss out on an opportunity, investors became more selective and took more time contemplating investment decisions, especially during the second half of 2016.
8. IPO Market Stalls—After a number of well-recognized names failed to obtain their private sector valuations, firms were reluctant to test the IPO waters. While there are reasons to be more optimistic about the 2018 IPO market, the success of Snap’s IPO (or lack thereof) may set the tone for the year.
9. Government Help Jumps—There has been a pick-up in government support of innovation and the development of technology hubs. The U.K. announced a £1 billion fund to build digital infrastructure, while Germany and France teamed up to create a €1 billion fund to assist startups.
10. Healthtech Attracts Most Attention—Investors were highly enthusiastic about funding companies that had solutions to the range of inefficiencies that plague the health care industry.

Source:

* “Venture Pulse Q4 2016,” KPMG Enterprises, January 2017

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