CB Insights and PwC MoneyTree Report

Of all the studies and reports outlining developments and setbacks from the startup sphere, the CB Insights and PwC MoneyTree Report is among the best. 

They have recently released the report for 2016, which contains helpful insights into investment figures for US-based startups, indicating the trajectory away from VC-backed investment over the course of the past 12 months. The patterns for VC-backed funding in 2016 were strikingly different to the preceding year, and speak to the economically volatile state of the economy. Read on for the Equitise summary of the 2016 Report.

CEO and co-founder of CB Insights, Anand Sanwal, said in relation to the 2016 report - “2016 served as a nice reset to 2015's exuberant funding environment, but for those who predicted 2016 would be the popping of the venture bubble, it was not.” Sanwal phrases 2016 as a ‘reset’ owing to the fact that, in the US, deals and dollars dropped 16% and 20% on the previous year – a trend that was mimicked worldwide, where deals and dollars declined 10% and 23% respectively in 2016, on full-year 2015. However, Sanwal attributes this to the fact that 2015 was an exceptional period – these figures, when compared with those from 2014 instead, translate far more favourably. Additionally, Sanwal hints towards what he considers the key tropes of 2017 investment could be – “in 2017, unicorns and mega-rounds could see some of the same headwinds as in 2016, but interestingly, the introduction of new big money investors from the likes of Asia and increasingly the Middle East may serve to offset that. An expected healthy IPO and M&A market should also serve to help the VC market as well.” To put it in dollar terms, Q4 2014 saw $11.7 billion invested in US VC-backed startups across 982 deals, down 17% in dollars and 14% in deals from Q3 2016. 

Deal activity fell consistently during 2016, hitting a multi—year low, with the quarterly count failing to surpass 1000 deals for the first time since 2011.  US Venture Capital Leader at PwC, Tom Ciccolella, explains it accordingly: “Despite continued deceleration in venture capital investment activity, the startup ecosystem remains flush with quality deals.” Indeed, 2016 witnessed four new unicorns (private companies valued at over $1 billion), equal to Q3 2016.  

While 2015 holds the record for number of unicorns, peaking at 16 in Q3, this figure is nonetheless impressive, and testament to the industry’s power. Regarding what will continue to motivate investors in 2017, perhaps more than the disappointing results from 2016, Ciccolella claims that “as industries continue to be disrupted by technology and Internet capabilities, new opportunities are emerging. It’s these opportunities, despite the decline, that continue to drive venture capital momentum.”

The swirling financial instability and situations from 2016 were not necessarily conducive to startup investment. However, as the authors of this report state, the high quality of deals, resetting of the market, and less volatile economy predicted for 2017 should bolster numbers.  Whatever the case may be, Equitise will be here during the year to provide you with the most relevant reports on the startup sphere.

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