Investors Poured Less Money into Startups in 2016

Michael J. de la Merced reported in Friday’s New York Times that, “Investors who once poured money into the nation’s start-ups with abandon began to tighten their belts this year.

The amount of money that flowed into start-ups in the United States fell in 2016 for the first time in four years as the number of deals struck tumbled to their lowest levels since 2011.”

The article noted that, “But the technology world has high hopes that 2017 will prove to be brighter, as the parent company of Snapchat and other highfliers prepare to go public and venture capitalists amass huge new war chests.

“About $67.8 billion was invested in start-ups in 2016, according to data from PitchBook, down 15 percent from last year. And just 7,841 deals were struck, down 25 percent from the period a year ago.

“Much of 2016 proved to be a less ebullient time for the once red-hot start-up market.”

Friday’s article added that, “Of course, heavyweight start-ups had little trouble raising money. Uber alone raised $3.5 billion from the Kingdom of Saudi Arabia, putting its cash hoard from outside investors at more than $11 billion. Lyft, Palantir and Snap Inc., the parent of Snapchat, all raised enormous sums as well, as did big non-American start-ups like the Chinese ride-hailing service Didi Chuxing.

And some start-ups sold out to bigger companies for multibillion-dollar valuations., an e-commerce company that began selling goods only within the last two years, sold itself to Walmart for $3.3 billion.

Investors are betting 2017 will be better. Renaissance Capital pointed out that the average total return of I.P.O.s in 2016 reached 23 percent, a sharp reversal from the negative 2.1 percent return of 2015 offerings and surpassing the 21 percent return of two years ago.”

This entry was posted in Start-up Company Law. Bookmark the permalink. Both comments and trackbacks are currently closed.