Venture capital investments rebound for tech startups

Fri Jul 15, 2016 12:13am EDT
 
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By Heather Somerville

SAN FRANCISCO (Reuters) - Venture capital investments in startups rebounded in the second quarter, as a general stock market recovery helped restore confidence, according to a new report published on Friday.

Investors plowed $15.3 billion into venture-backed startups in the second quarter of this year, a 20.5 percent increase over the $12.7 billion invested in the first quarter, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association. The report's conclusions are based on data from Thomson Reuters.

"There was a bit of a pause in the first quarter when the public markets took a beating," said Sean Cunningham, managing director of Trident Capital Cybersecurity. "The public markets are back. Everyone is bullish."

Ride-hailing company Uber Technologies Inc [UBER.UL] and messaging app Snapchat boosted the quarter, raising a combined total of $4.8 billion, or nearly a third of total investments.

In terms of total dollars, second-quarter investments outpaced all but three quarters since 2000, the height of the dot-com boom, suggesting that despite widespread concerns over valuations and a dormant market for tech initial public offerings, venture capitalists and institutional investors are not shying away from writing big checks.

"It's not heading straight to the moon and it's not going off a cliff," said Tom Ciccolella, who leads the venture capital practice for PwC, a consulting firm.

Even as total funding was up sharply, the number of deals was down by about 5 percent, falling to 961 from 1,011 during the first quarter.

"We are being more selective," said Erik Gordon, professor at the University of Michigan Ross School of Business and faculty adviser to the university's venture capital fund. "We're not going to invest in everything that says 'We are the Uber of X' or 'the Facebook of Y.'"   Continued...

 
A billboard displays the logo of Snapchat above Times Square in New York March 12, 2015. REUTERS/Lucas Jackson