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 US saw only USD14.8 billion invested in Q1 2016, a slight increase (six percent) from Q4 2015, 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,” says Brian Hughes, National Co-Lead Partner, KPMG LLP’s Venture Capital Practice. “VC investors are looking for performance rather than possibility.”
According to the report, seed-stage investments fell to less than a quarter of all deals in Q1 2016, 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 2016 matched last quarter’s high of USD3 million, up 50 percent from Q1 2015. Meanwhile, according to the report, mean late-stage deal size in North America plunged to USD21.5 million in Q1 2016, down from USD30 million in Q4 2015, and USD34 million in Q3 2015.
“New companies looking for early-round investment need to re-evaluate their pitch,” says 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.”
