VC deals drop 36% in Q2, but the amount invested still rises

There is more money going into significantly fewer deals, causing the average deal size to rise 43%

Financial trends and news by Steven Loeb
July 6, 2016
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Q1 of this year was not good for venture capital, with deals sinking 38 percent, and exits plunging 40 percent. Investors and entreprenuers had to be hoping that the numbers would start to bounce back in Q2.

There is actually some news, as dealflow is coming bach, albeit slowly, according to new data out from Pitchbook. 

Globally, there were 2,803 deals in the second quarter. That was up 4 percent from Q1, but down a significant drop of 36 percent from 4,390 in the same quarter the year before. So while things are slowly getting better, they are still a long way off from where they were.

The numbers are better when it comes to the amount of money being put into startups. With $43.2 billion invested, the number grew 35 percent quarter-to-quarter, and it was also up 29 percent from the $33.5 billion invested in Q2 of 2015.

Of course, with more funding going to less deals, the average deal size also increased 43 percent year-over-year, from $1.6 million to $2.3 million. 

While investing is seeing an increase, the number of exits continued to fall, dropping 36 percent year to year, from 418 in the first quarter of 2015 to only 266 this past quarter. At the same time, the amount of capital exited rose 48.5 percent, from $16.5 billion to $24.5 billion. It nearly doubled from the $12.4 billion in capital exited in Q1. 

The overwhelming majority of the exits last quarter were acquisitions, 210 of them, or 79 percent. There were only 24 IPOs and 32 buyouts.

These numbers also make a lot of sense when you also look at the VC fundraising numbers. While the down market may be making investors more skittish about which companies they invest in, they still have a lot of money to throw around. 

In the second quarter of 2016, there were 101 funds closed, up 12 percent from Q1, but down 5 percent year-to-year. Together, they raised a total of $18.7 billion, a 12 percent quarter-to-quarter increase, and a 15 percent increase from the same quarter a year ago.

Andreessen Horowitz had the largest VC raise of the quarter, with Fund V, a $1.5 billion venture capital fund the firm closed in June. That was followed by Kleiner Perkins' $1 billion KPCB Digital Growth Fund III, which it closed last week. 

There's more money flowing into VC than there has been in years, and VCs are spending it; they're just putting more money into fewer companies

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