Venture capitalists’ enthusiasiasm for new ideas shows no sign of stopping, with 2016 on track to hit near unprecedented levels of investment.
Venture capitalists poured $15 billion into startups in the third quarter in nearly 6000 funding deals, according to the latest report from venture capital database PitchBook Data Inc and the National Venture Capital Association. If financing continues at this pace it could hit $74 billion by December, making it one of the sector’s most active periods since 2000.
“The rounds keep getting bigger,” said Adley Bowden, vice president of analysis for PitchBook. “As valuations go up and firms are trying to get a certain ownership percentage, the check size goes up as well.”
Unicorn companies – venture-backed companies valued at $1 billion or more – continue to attract the most investment, however many are switching to accelerators such as Y Combinator to raise their first round of cash. Angel and seed financing fell 18 percent in the third quarter as start-ups continue to see accelerator programmes as their first port of call. Either way, however, it seems capital is not an issue:
“The Airbnbs and the established unicorns … are not having trouble raising capital and very large rounds”, said Bowden.
With growing financial uncertainty across the sector, especially in Britain in the wake of Brexit, many expected companies to find it increasingly difficult to find funding; however if anything, the popularity of venture capital funding appears to have grown. Uber Technologies recently raised $3.5 billion from Saudi Arabia’s sovereign wealth fund in June, a relatively small amount when the median round size stands at about $10 million for the third quarter of 2016.
Yesterday Israeli company Payoneer became the subject of one of the biggest funding rounds by a fintech firm this year after successfully raising $180m from venture capital investors. The company, who specialise in cross-border payments, is growing at double digit rates and generating more than $100m of annual revenues. CEO Scott Galit said the new funds would allow it to expand into new markets and build up its “local presence”.