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Q3 VC Continues To Look Light

Editor’s Morning Note: Venture investment into American startups during the third quarter looks very light.

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The third quarter isn’t over yet, and there is quite a lot of data yet to cull, analyze, and sort. However, an early look at the performance of venture activity in this country during the period is not encouraging.

As you might recall, we executed a similar exercise in mid-August, writing that the third quarter may set a new local-minimum, compared to recently preceding periods.

That’s likely going to remain accurate unless September ends with a bang.

Not So Good

With another month under our belt, our third-quarter data is far more robust. Heading into the last few weeks of the period, a couple things stick out:

  • Extending September to full length using its current at-pace figures hints that third-quarter US VC activity may best a single quarter since the first of 2014 for round volume, the first quarter of 2014.
  • Examining monies invested instead of rounds executed, the third quarter of 2016 will only beat one quarter since the first of 2014 for dollars disbursed, the third of 2014.

That makes for a very weak period. (Keep in mind that, for this dataset, we filter out private equity, but do count angel activity that is rounded into broader seed investing.)

Those facts are starker when you compare the first and second quarters of 2016 to the current:

  • At pace, third quarter venture deal volume in the US will wrap up down half the pace set in the first quarter, and about 25 percent down from the second.
  • At pace, third quarter venture capital monies invested in the US will conclude the period at less than half the first quarter’s tally, and around half of what was invested in the second quarter.

That should feel surprising. It doesn’t match up with the current venture capitalist-speak we hear in the press, especially as venture capital firms and funds raise tectonic new sums, and new funds crop up at Nasdaq all-time highs.

I can’t quite square the above data compared to prior periods with the fact that people aren’t screaming about a funding slowdown in the streets. But I haven’t yet broken down the quarter into Series-level round data compared to historical norms (we’ll do that in our third-quarter wrapup), so more to come. It could be that we are merely seeing Series-specific shifts than the aggregate data might suggest. We’ll see.

For now this is your final warning note that things don’t look amazing. More as all the data settles.

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© Mattermark 2017. Sources: Mattermark Research, Crunchbase, AngelList.
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