Dive Brief:
- Research from PitchBook Data and the National Venture Capital Association found that although the U.S. venture capital industry raised the most last year since 2001 at $41.6 billion, investment in startups is down, according to reporting by Bloomberg.
- At the same time, last year VC-backed startups had the lowest level of exits, either by acquisition or IPO, since 2010.
- VCs are looking to 2017 for investment opportunity as backers like endowments and pension funds might look to put money elsewhere if VCs continue fundraising without producing results.
Dive Insight:
One of the more highly anticipated investment opportunities in 2017 is the expected initial public stock offering from Snap, Inc., parent company of Snapchat, which is scheduled for March. Snap has a current market valuation of $18 billion and its IPO is expected to rival, or maybe even surpass, China’s Alibaba September 2014 IPO of $25 billion, a global record. If Snap is able to match the pre-IPO hype, it could spur additional VC investment overall in startups.
Investors are more cautious these days when it comes to tech startups than they were during the heady early days of the mobile era. As the space matures, there are fewer breakout opportunities and some previous investor darlings like Twitter are struggling. In the marketing and ad tech spaces, Facebook and Google are so dominant that there it would be tough for a startup to make headway. However, if Snapchat is able to drive strong interest from investors and maintain growth, this could suggest that there is still room for innovation.
Last year was a tough one for VC-backed IPOs. With a total of 726 deals including both IPOs and acquisitions, only 39 VC-backed companies went the public route.
The buzz around Snap notwithstanding, the Bloomberg U.S. Startups Barometer index has fallen 22% in the last month due to a decline in acquisitions, IPOs and capital raising by startups. A first according to Bloomberg data.
