The first quarter of 2016 extended the global decline in VC activity with both total deal volume and deal value declining, further following a major dip in Q4’15. Some of the factors driving VC investors to take a more measured investment approach include; an economic slowdown in China, rising interest rates and an approaching election in the US, and a June referendum over the UK’s future in the European Union.
While disconcerting to the VC community, the decline in VC activity is likely to be a short-term trend given the amount of liquidity in the market around the globe. In fact, in the US, Q1’16 was one of the highest quarters for raising VC capital since the dot-com boom of 2000. These funds will likely be deployed over the coming quarters as VC investors renew their focus on finding disruptive or innovative companies in which to invest.
At the same time, future VC investments are poised to become even more targeted. Given ongoing market uncertainties, investors are likely to focus on companies with strong balance sheets or business models that show a strong plan to achieve profitability. VC investors may also take a more involved approach to their funding, asking for more input and control over how their invested capital is deployed.
Source : KPMG