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Venture Capital Investment Rises Slightly in Q2

A Quarterly Wink and a Glance at Venture Capital 

While Q1 2016 saw a sharp pullback in venture capital investment, with only $13.1B invested, Q2 investment rebounded with investments totaling $15.8B. This number could be slightly misleading, because approximately $5B of the amount invested was for just a pair of companies: Uber and Snapchat. Quarter 2 marks an impressive 10th consecutive quarter of more than $10B in venture capital invested in a single quarter. 

Half the Picture

Year over year, for the combined first 2 quarters of 2016, venture capital investment is down more than 20% compared to the first 6 months of 2015. While U.S. startups raised $36.7B in the first half of 2015, they only raised $29B in the first 6 months of this year. 

Quantity vs. Quality

In another slightly disappointing indicator, only 961 companies were funded by venture capitalists in Q2 2016. This was the slowest quarter in terms of deal activity since Q3 2010, when 744 companies received funding. But even though we are seeing declines in the number of deals, large deals (ones in excess of $100M) are on the rise. Investments of $100M or more accounted for a significant 39% of deal value for Q2 2016. 

Sunshine or Storm Clouds Ahead?

It appears venture capitalists are remaining active, since they have large funds from which to invest. But the VCs are certainly becoming more selective in terms of how they deploy capital. Venture capital investment for the second half of 2016 will certainly be impacted by the upcoming U.S. presidential election, possible increase in interest rates, and the economic slowdown in China. 

Next time in a Wink and a Glance, we’ll examine if—and keep our fingers crossed that—Q3 of 2016 provides yet another quarter of growth. 

About Alan Wink

Mr. Wink assists clients with capital budgeting, capital structuring and capital sourcing. He has worked with many tech and life science companies on developing the appropriate capital structure for their position in the business life cycle.

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