The Death Of Venture Capital? The Good & Bad News

ZeroHedge attracts attention today with its clickbait header about the potential death of VC firms. They quote this Bloomberg article and the associated stats showing declines across the board – from startup funding to M&A and IPO activity. The stats show a 25% decline in startups raising money, a 34% decline in first round fundraising and an almost 9% decline in exits (sale of the business / IPO).

Few business communities swing from boom to bust as reliably as Silicon Valley, but detecting shifts in this opaque world can be challenging. To help illuminate the field, Bloomberg created the U.S. Startups Barometer, a new weekly indicator that tracks the overall health of the business environment for private technology companies based in the U.S.

So how ‘healthy’ is the American Venture Capital business?

And it turns out that founders are realising that they can grow large businesses without VC capital. According to this post, even unicorns are now going public without having ever used VC money. 3 out of the 9 companies with $1B+ valuations that went public in the last six months were funded without venture capital involvement:
– AppLovin acquired for $1.4B ($4M raised from friends and family)
– Media.net acquired for $900M (no investment from VCs)
– Outfit7 acquired for $1B (no investment from VCs)

In other news, MarketWatch shouts about the Market Pulse quarterly survey in which it claims optimism for business sales in 2017 has “soared”.

Nearly three-quarters (74 percent) of business brokers—professionals who aid in the buying and selling of businesses—expect an increase in new clients coming to market in 2017, according to the quarterly Market Pulse Report published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project.

Compared to one year ago, brokers are feeling an increased sense of optimism regarding closing rates, business exit opportunities and business conditions. When asked at the end of 2016 about their outlook for 2017, three-quarters of respondents said they expected a net increase in new deals, compared to 60 percent who expressed optimism for 2016.

Elsewhere, Techcrunch talks about why it’s important to invest through VCs.