CBInsights and KPMG have put together a monster 101 slide deck together on venture capital activity across the world in the Q1 of 2016. It highlights a continued global decline in VC activity with both total deal volume and deal value falling, further to a major dip in Q4 2015.
Some of the factors driving VC investors to take a more measured investment approach include;
- an economic slowdown in China,
- rising interest rates and an approaching election in the US, and a
- June referendum over the UK’s future in the European Union.
Whilst this is not sunshine and roses for the VC community and startups alike, the decline in venture capital activity is thought to be a short-term trend given the existing liquidity in the market. As evidence, they find in the first quarter of 2016 in the US was one of the highest quarters for raising VC funds since the dot-com boom (and bust) of 2000.
Concurrently, as new committed capital will need to find a home, they believe future investments will be held to a higher standard with investors likely to focus on startups with strong balance sheets or business models that have some form of path to profitability. Optimistically, they also believe VC investors may take a more ‘involved approach’ to investing, requiring more input and control over how their cash is deployed.
As a part of their analysis in this deck, they explore answers to a range of questions, including:
- What is driving the decline in VC activity – and will it last?
- Why are corporates so active in the VC market?
- Is the Unicorn trend dead?
- How is digital health bucking investment trends?