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Venture Activity 2015

By February 3, 2016Commentary

Full year and fourth quarter National Venture Capital Association reports are out for 2015. (NVCA Reports)  At the start of the cycle, the raising of venture funds, $28 billion was raised in 2015 for 235 funds, $5 billion in the fourth quarter, where 20 raises were for new funds and 26 were follow-ons.  The 2015 total compares to $31 billion raised in 2014 for 271 funds.  Next, investing by venture funds, for the year 2015 $59 billion was invested compared to $51 billion in 2014, with roughly the same number of total deals in each year.  Software got the bulk of the funds, with biotech a distant second.  For the fourth quarter $11 billion went into 962 deals compared with $16 billion in Q4 2014 and $17 billion in 1149 fundings in Q3 2015.  So funding activity is slowing year-over-year and quarter-to-quarter.

Now the exits, which are critical to maintaining the cycle.  There were 77 IPOs in 2015 with a value of $9.4 billion compared to 117 with a value of $15.5 billion in 2014.  For the fourth quarter, there were 16 IPOs, versus 15 in Q3 2015.  There was limited non-biotech health care activity in the fourth quarter.  In regard to mergers and acquisition activity, 372 venture-backed firms were acquired in 2015 compared to 485 in 2014 and the value of the subset of announced deals was $16.3 billion in 2015 versus over $20 billion in 2014.  And in the fourth quarter M & A transactions declined to 91 from 109 in the third quarter.  While things slowed at the end of 2015, they have screeched to a halt in 2016 so far.  As I write this, there has not been a single IPO in 2016 and the health care M & A market also appears slow.  Slowing economies and down markets, however, often provide a better valuation environment for venture capital firms, so we might see a “healthy” pace of investments.  But the venture investing cycle drives a lot of economic activity and when it slows, it both reflects and contributes to a slowing general economy.

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