Global venture investing dropped like a rock in Q4

It saw the lowest number of deals in two years, as mega-rounds and new unicorns both took big hits

Financial trends and news by Steven Loeb
January 8, 2016
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As Blood Sweat & Tears once said, "What goes up must come down." And, oh how true that is, as the VC market learned this past quarter.

After a quarter where the global venture capital saw its best numbers in years, the market faceplanted hard in Q4, to its lowest point in a long while.

There was $27.3 million invested in 1734 deals in the fourth quarter of 2015, according to data out from CB Insights. That represents a 30 drop in funding quarter-to-quarter, while deal activity fell 13 percent.

That was the lowest amount of deal activity seen in nearly two years, going back to the first quarter of 2013, and it broke a streak of six quarters in a row with at least 2,000 global deals.

So what happened? CB Insights is blaming the fall on the lack of mega deals in the quarter. 

In the third quarter, there were 72 deals of at least $100 million. That number was chopped nearly in half in Q4, with only 39, as did the amount raised by those companies, going from $20.3 billion in Q3 to $11.7 billion in Q4. 

North America and Asia each saw a significant decrease in mega-rounds from the previous quarter, with America going from 39 such rounds to 18, and Asia going from 27 to just 16. 

Mega rounds were so huge in Q3 that just two companies alone were responsible for raising over 10% of all capital raised in the U.S. 

One not very surprising thing in this report: there were many fewer unicorns this past quarter, with the number of companies reaching billion dollar valuations dropping to nine, after hitting 23 in both Q2 and Q3. It was the lost number new unicorns since the second quarter of 2014.

2015 was a big year for unicorns overall, as there were 47 new ones in the U.S. alone, for a 38 percent increase over 2014. There were also 28 new unicorns outside of the U.S., a 100 percent increase over the 14 from last year, for a total of 78. That equals 1.5 new unicorns every single week for the year.

And, yet, this was also the year when investors paniced over ballooning valuations, leading them to devalue come of the biggest companies in the world.

Fidelity, for example invested in Snapchat's $538 million round this past May, which valued the company at $15 billion, a round that made Snapchat the fourth most valuable private company in the United States, behind Uber, Airbnb and Palantir. Then, earlier this moth firm decided to write down the value of its stake by 25 percent, dropping it from $13.9 billion to $10.4 billion.

The firm also cut the value of its shares in Zenefits by 48 percent, and marked down the value of its share in Dataminr by 35 percent.

The same thing happened to Dropbox earlier this year, when of its investors, BlackRock, cut its estimate of the company’s per-share value by 24 percent.

It's not yet known if the unicorn trend really over, or if this is just a hiccup. That new data, however, shows that the trend might really be over.

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