Last month, the National Venture Capital Association (NVCA), a trade association representing the U.S. venture capital industry, released the results of its Pitchbook-NVCA Venture Monitor report on venture funding for the fourth quarter of 2016, as well as for the year as a whole. With respect to the fourth quarter, the report indicates that venture capitalists invested $12.71 billion in 1,744 deals in the fourth quarter, which constituted a 19% decrease in dollars and an 11.8% decrease in deals as compared with the third quarter of 2016, when $15.7 billion was invested in 1,979 deals (see chart below, which shows total venture funding from the first quarter of 2013 through the fourth quarter of 2016; data from Pitchbook report; click on chart to expand). The fourth quarter of 2016 was the 16th consecutive quarter in which more than $10 billion in venture capital was invested. However, as compared with the fourth quarter of 2015, invested dollars and deals were down 24.7% and 26.6%, respectively, in the fourth quarter of 2016.
The report also indicates that venture capitalists invested $69.11 billion in 8,136 deals in 2016, which constituted a 12.8% decrease in dollars and a 22.3% decrease in deals as compared with 2015, when $79.26 billion was invested in 10,468 deals (see chart below, which shows total venture funding from 2006 to 2016; data from Pitchbook report; click on chart to expand). Although venture funding topped $68 billion for the third consecutive year, which represented the second highest annual investment total in the past 11 years, the drop in venture funding in 2016 as compared with 2015 snapped a string of four consecutive year-over-year increases. The NVCA, however, explained that "[g]iven the high levels of venture investment activity recorded in 2014 and 2015, 2016 represented less of a decline and more of a return to normal for the venture capital industry." NVCA President and CEO Bobby Franklin suggested that "venture investment levels are readjusting after peaking in 2015," and that the NVCA viewed the "recalibration [in 2016] as a healthy normalization and a return to a much steadier pace of investment."
In 2016, the software sector once again took the top spot in funding -- with $32.98 billion invested in 3,100 deals -- which constituted an 11-year high in funding for that sector, and marked the third consecutive year in which the sector topped $29 billion in funding and the eighth consecutive annual increase in funding for this sector. Funding in the software sector in 2016 was up 5.6% as compared with 2015. Pharma and biotech venture funding in 2016 ran a distant second to the software sector, with $7.79 billion invested in 515 deals, with funding in 2016 down 21.2% as compared with 2015. The decrease in funding in 2016 in the pharma and biotech sector snapped a six-year string of consecutive year-over-year increases.
For additional information regarding this and other related topics, please see:
• " Second Quarter Venture Funding Increases 20% from First Quarter," October 11, 2016
• "Venture Funding Reaches Highest Level in More Than a Decade," February 25, 2016
• "Third Quarter Venture Funding Declines 27% from Second Quarter," October 22, 2014
• "Software Sector Leads Pack in 2Q Venture Funding and Biotech Sector Finishes Second," July 20, 2014
• "Software Sector Leads First Quarter Venture Funding to Thirteen Year High; Biotech Sector Finishes Second (Again)," April 30, 2014
• "Biotech Venture Funding Rebounded in 2013 After Strong Fourth Quarter," January 26, 2014
• "Biotech Venture Funding Sees Second Quarter Rebound," July 22, 2013
• "Biotech Venture Funding Down 33% in First Quarter," April 30, 2013
• "Annual Venture Funding Drops for First Time in Three Years," February 4, 2013
• "Biotech Venture Funding Up 64% in Third Quarter," October 29, 2012
• "Venture Funding in Life Sciences Sector Drops 9% in Second Quarter," July 22, 2012
• "Biotech Venture Funding Drops 43% in First Quarter," May 3, 2012
• "Venture Funding Increased 22% in 2011," February 2, 2012
• "Life Sciences Venture Funding Drops in Third Quarter," October 27, 2011
• "Life Sciences Venture Funding up 37% in Second Quarter," August 1, 2011
• "VentureSource Reports 35% Increase in 1Q Venture Funding," April 26, 2011
• "NVCA Reports Modest Gains in First Quarter Venture Funding," April 19, 2011
• "NVCA Reports 31% Drop in Venture Funding for Third Quarter," October 17, 2010
• "NVCA Reports 34% Increase in Venture Funding for Second Quarter," July 22, 2010
• "NVCA Report Shows First Quarter Drop in Venture Funding," April 20, 2010
• "Biotech/Pharma Financing Improving, R&D Spending Up," August 31, 2009
• "NVCA Study Shows Increase in Third Quarter Venture Funding," October 23, 2009
• "First Quarter Venture Capital Funding at 12-Year Low," April 23, 2009
• "NVCA Study Shows Decline in 2008 Investment; BIO Study Predicts Biotech Rebound in 2009," February 16, 2009
