Fears of a potential slowdown in tech funding in the US are emerging, with data showing venture capital (VC) firms raised less money and closed fewer funds last year, while investments and the number of new funds raised also fell.
Investments fell by 9pc last year and the number of new funds raised is down 25pc year-on-year.
VC commitments decreased 9pc from $31.1bn in 2014 to $28.2bn last year, according to the National Venture Capital Association and Thomson Reuters.
The upshot is the funding environment for start-ups in Silicon Valley and around the world could be a lot tighter in 2016.
Still, this is a lot higher than the $17.7bn and $19.9bn raised in 2013 and 2012 respectively and higher than the yearly average of $20.32bn since 2006.
‘In the last two years alone, close to $60bn has been raised for deployment to the entrepreneurial ecosystem to help build and grow the next generation of great American companies’
– BOBBY FRANKLIN, NVCA
For the past number of months, there has been considerable debate around the unbridled growth of tech start-ups and particularly unicorns like Uber and Airbnb, whose valuations have soared based on considerable follow-on rounds. Unlike their counterparts of 16 years ago, however, many have the underlying revenues and services consumers enjoy to show for their efforts.
But that doesn’t mean the storm clouds are far away. There were 26 follow-on funds and 20 new funds raised during the fourth quarter of 2015.
The number of new funds raised during 2015 marks a 25pc decrease from the number of first-time funds raised during 2014. The number of follow-on funds raised during the year fell 5pc compared to a year ago.
Total commitments to US venture funds in the fourth quarter of 2015 was led by Tiger Global Private Investment Partners X, which raised $2.5bn in the largest fundraising commitment of the fourth quarter and the second largest fundraising during 2015.
Trinity Ventures XII raised $400m during the fourth quarter and USVP XI raised $300m.
The largest new fund reporting commitments during the fourth quarter of 2015 was from the Washington DC-based Accion Frontier Inclusion Fund, which raised $90m for the firm’s inaugural fund.
Fears of a tech funding slowdown may be premature, says NVCA
However, fears of a tech funding slowdown, despite the data, may be premature, insists NVCA president and CEO Bobby Franklin, who pointed out that VC players currently have a war chest of $60bn to invest in the companies of the future.
“Building on the strong pace set last year, 2015 emerged as another strong fundraising year for the industry,” Franklin said.
“In the last two years alone, close to $60bn has been raised for deployment to the entrepreneurial ecosystem to help build and grow the next generation of great American companies.
“Overall, the fundraising environment is quite healthy. It’s been encouraging to see such a diverse mix of fund sizes in recent quarters, which demonstrates to us that the fundraising environment is becoming a lot more favourable for firms of all shapes and sizes.”
Venture capital meltdown image via Shutterstock