Slight gain in investment dollars outweighed by decline in deal volume from Q4’15
Investment into venture capital (VC)-backed companies in the United States has slowed in back-to-back quarters, according to Venture Pulse, the quarterly global report on VC trends published jointly by KPMG International and CB Insights.
The U.S. saw only $14.8 billion invested in Q1’16, a slight increase (six percent) from Q4’15, while the number of actual deals declined, slipping an additional two percent from last quarter to 1,035 deals. These two quarters are a major slowdown from an otherwise record year for VC investment in FY15.
“Though we feel there is a considerable amount of dry powder in the market, overall concerns around the global economy and a decline in valuations are leading investors to be far more selective,” said Brian Hughes, National Co-Lead Partner, KPMG LLP’s Venture Capital Practice. “VC investors are looking for performance rather than possibility.”
To read the full Venture Pulse Q1’16 report, click here.
According to the report, seed-stage investments fell to less than a quarter of all deals in Q1’16, dropping to a five-quarter low of 22 percent. Series A rounds actually outpaced seed deals for the quarter, reversing the trend of previous quarters.
Median early-stage deals in Q1’16 matched last quarter’s high of $3 million, up 50 percent from Q1’15. Meanwhile, according to the report, mean late-stage deal size in North America plunged to $21.5 million in Q1’16, down from $30 million in Q4’15, and $34 million in Q3’15.
“New companies looking for early-round investment need to re-evaluate their pitch,” said Conor Moore, National Co-Lead Partner, KPMG LLP’s Venture Capital Practice. “Focusing on the size of the market and potential revenue is no longer enough. Funding will likely depend on them having a clear vision of their road to profitability.”
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