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| Source: KPMG Enterprise Venture Pulse Q4 2016. Steep slide in the number of VC deals in 2016. |
Following 2015’s peak funding levels, 2016 was a challenging year for venture capital (VC) investment across the globe, with decreases in both the number of deals and the total value of VC investment, according to Venture Pulse Q4 2016, a quarterly report on global VC trends published by KPMG Enterprise.
Worldwide venture capital activity declined by 24% year over year, though total global venture capital investment remained substantial at US$127.4 billion*. After a strong start to 2016, investor optimism quickly turned cautious and purse strings tightened over the second half of the year. Market uncertainty was further fuelled by geopolitical upheavals, including the UK’s Brexit vote and the US presidential election.
“VCs are taking this respite, triggered by global uncertainties, to reassess their portfolio and focus on only seeking out top quality deals and also in helping their portfolio companies more actively in their next level of growth,” said Chia Tek Yew, Head of Financial Services Advisory at KPMG in Singapore. “As such, whilst there was an absence of megadeals, we continue to see significant interest and development in core sectors such as fintech, insuretech, healthtech and underlying technologies in cybersecurity, artificial intelligence and Internet of Things.”
“VCs are taking this respite, triggered by global uncertainties, to reassess their portfolio and focus on only seeking out top quality deals and also in helping their portfolio companies more actively in their next level of growth,” said Chia Tek Yew, Head of Financial Services Advisory at KPMG in Singapore. “As such, whilst there was an absence of megadeals, we continue to see significant interest and development in core sectors such as fintech, insuretech, healthtech and underlying technologies in cybersecurity, artificial intelligence and Internet of Things.”
In Asia, while the total number of deals dropped dramatically, the total amount of VC invested remained steady year over year at around US$39 billion – the only region to do so. However, Q416 ended on a low note, with 24.7% less investment and 29% fewer deals than the same quarter last year.
Despite a late year slump, investment in China was up year over year – reaching a record US$31 billion invested. This despite the number of deals dropping from 516 to just 300 between 2015 and 2016. India showed an almost opposite trend, with the number of deals remaining relatively high, while total VC invested dropped over 50% from US$8.2 billion to US$3.3 billion year over year.
Despite a late year slump, investment in China was up year over year – reaching a record US$31 billion invested. This despite the number of deals dropping from 516 to just 300 between 2015 and 2016. India showed an almost opposite trend, with the number of deals remaining relatively high, while total VC invested dropped over 50% from US$8.2 billion to US$3.3 billion year over year.
“Even though some VCs may still stay on the sidelines to await clearer signs of improvements in the economy, several sectors in Singapore have managed to remain attractive,” said Chia. “Technology companies have been steadily receiving funding and with artificial intelligence and cognitive learning expected to transform everyday life and business, they will continue to be appealing in 2017.”
*Data for the report provided by Pitchbook.
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