Global Venture Capital Trends for Fall 2015
What can venture capitalists expect for the last part of 2015? If the first two quarters are any indication it does not look too bad. However, that is not without some concern in key areas. Venture capital backed companies saw 1,819 deals in the first half of the year and raised over $32 billion. Globally, these figures were reflected with an impressive $59.8 billion. The first two quarters of 2015 were representative of about a 49% increase over the increases seen in the same two quarters of last year.
What is driving growth?
There were some very large deals in the first part of this year that drove funding trends worldwide. Presently, VC funded companies are on the rise and in the first half of 2015 there were over 100 mega rounds. Just the second quarter saw 61 deals that raised over $16 billion investment dollars. Driving this growth are lower interest rates. It is expected for this growth trend to continue throughout the remainder of the year since interest rates are remaining pretty much the same.
Another factor behind the trending growth is more participation in mutual funds, VC funding and hedge funds. Right now, the amount of available capital remains huge. Companies being backed with venture capital funding are staying private for longer periods of time and some of the best companies have a decent variety of funding options. These trends are also seen on a global basis and startups continue to reshape the markets across the board from hospitality to transportation and healthcare.
Continued Growth in “Unicorn” Investments Predicted
The first half of 2015 was exceptionally good for Unicorns. These are VC backed companies that have valuations over $1 billion. The first quarter of this year saw exceptional growth with 11 new Unicorns; but the second quarter more than doubled that with 24. These numbers included 12 new Unicorns located in the US and 9 in Asia. Some of the latest Unicorns include Zenefits, MarkLogic and Oscar Health Insurance. It is expected that the final half of this year will bring several more Unicorn companies on board.
Will Equity Crowdfunding Surpass VC and Angel funding?
Many predict that crowdfunding may surpass venture capital funding as soon as 2016. The venture capital industry invests $30 billion on average every single year. The crowdfunding industry has continued to double each year. It also has the advantage of being spread over several types of funding models which includes donations, rewards, debt/lending and equity. This new “collaborative economy” has been enough to disrupt some of the previous industry giants such as transportation and real estate. It uses the internet as leverage to generate businesses that are massively scalable.
Where is all this going?
The World Bank has already predicted that crowdfunding is going to reach $90 billion by the year 2020. But if it continues to double every year it will most likely realize $90 billion as early as 2017. To gain a proper perspective, VC funding averages around $30 billion a year and in 2014 alone accounted for about $45 billion in investments. Angel capital also averages approximately $20 billion each year. The newest crowdfunding category is equity and it opened publicly late in 2013. It is still restricted to only accredited investors but has already reached about $1 billion in online investments. The estimates for 2015 for equity crowdfunding are more than $2.5 billion.
What’s the connection?
Crowdfunding is not out there all alone in the investment sector. Don’t forget that equity crowdfunding includes venture capitalists and angel investors as participants. Instead of being totally separate, crowdfunding uses an inclusive methodology which brings in both individual and institutional investors including venture capitalists.
The biggest difference is that the venture capitalist cannot scale and crowdfunding platforms can depending on the specific model. The impact and growth rates can be literally staggering in the next coming years.
How are VCs and angels to respond to equity crowdfunding?
If crowdfunding continues at its present growth rate as is expected, how will it affect the venture capital market and angel funding? For one thing, many VCs and angels are already incorporating equity crowdfunding into their investment strategies. They do not have to work totally separate but if combined, it can mean the difference for many businesses. Time alone will tell, but it could be that these can work together to create a solid and stable source of funding.
Posted on November 25, 2015, in economics, financial news, VC Market, Venture Capital and tagged angel investing, crowdfunding, Unicorn investments, VC Market trends. Bookmark the permalink. Leave a comment.