Venture Capital Firms Face Slowdown in Tech Funding
According to latest report from National Venture Capital Association (NVCA) and Thomson Reuters, there is a slight decline in venture capital funding compared to that of last year. This may signal a tighter funding for the year 2016.
In the report, NVCA as the association of venture capital firms, release data of venture capital market in 2015. The report showed that while venture capital firms kept up a strong fundraising pace in 2015, but the dollar commitments down 9% in the year. However, according to CFO.com, the amount is still well ahead of annual average since 2006.
Thomson Reuters and the National Venture Capital Association (NVCA) data showed that VC firms raised $28.2 billion last year, down from $31.1 billion in 2014. Since 2006, the annual average in dollar commitments is $20.32 billion. The strongest pace in 2015 was achieved in fourth-quarter, as commitments reached total $5 billion for 46 funds, an increase of 9% from the third quarter.
Total of capital raised from last two years reached almost $60 billion, and record a huge increase from only $17.7 billion in 2013 and $19.9 billion in 2012.
President and CEO of the association Bobby Franklin said in NVCA news release, "Building on the strong pace set last year, 2015 emerged another strong fundraising year for the industry." He took note of capital increase within last two years as, "to help build and grow the next generation of great American companies."
Bloomberg quoted research from CB Insights research firm noting that despite venture capitalist invested more money into private tech companies in 2015, but the number of investment declined. This indicated the investors are looking for a fewer company for a larger deals, such as recent investment in Flipkart, Ola, and Airbnb.
On the other hand, a group of technology executives based in Canada and U.S. have launched a $100 million venture fund for tech company startups. The group, Leaders Fund is currently in discussions with several potential portfolio companies and plans to announce a few investments in the coming weeks. The group is especially interested in enterprise software areas such as mobile, cloud computing and machine learning.
David Stein, co-founder and managing partner of the fund told Reuters on Wednesday, "It's really about establishing a core investment portfolio." As for the targeted startup, he said, "We're essentially focused on software companies that sell to enterprises."
David Stein is a founder of Rypple, a social performance management software company. Salesforce.com acquire the company in December 2011 to become its human capital management unit: Successforce. Along with Stein, Leaders Fund also have Steve DeBacco and Gideon Hayden.
Tighter funding indication in 2016 showed the venture investors are becoming more selective to invest in the tech startups. Venture capitalists look for less startups but investing more capital for the prospective startups.