After Funding Winter, VCs may Venture out in 2017

Tech world has high hopes that 2017 will prove to be brighter, as highfliers prepare to go public & VCs amass huge new war chests
Investors who once poured money into the nation’s start-ups with abandon began to tighten their belts this year.The amount of money that flowed into start-ups in the United States fell in 2016 for the first time in four years as the number of deals struck tumbled to their lowest levels since 2011.

But the technology world has high hopes that 2017 will prove to be brighter, as the parent company of Snapchat and other highfliers prepare to go public and venture capitalists amass huge new war chests.About $67.8 billion was invested in start-ups in 2016, according to data from PitchBook, down 15 percent from last year. And just 7,841 deals were struck, down 25% from the period a year ago.

Much of 2016 proved to be a less ebullient time for the once redhot start-up market.

In years past, investors and the industry press alike delighted in anointing new “unicorns,“ the once-ballyhooed term for a start-up valued at more than $1 billion.

This year instead brought a healthy skepticism -while the apocalypse hasn’t arrived, leaner times are ahead.Start-ups have tightened their belts, laying off staff and focusing more on reaching profitability rather than skyrocketing user growth.

Just 12 companies joined the unicorn club, according to the data provider CB Insights, a 70% drop from 2015.

And initial public offerings -one of the pri mary ways that investors in start-ups can harvest their gains -tumbled sharply during 2016 amid uncertainty and tumult in the stock market.

Just 105 offerings priced during the year, according to data from Renaissance Capital, down 38% from 2015.

Those deals raised $18.8 billion, also a 38% drop from the year-ago period. Both hedge funds and big mutual funds, which have been among the most enthusiastic new backers of new private companies, continued to largely show reluctance in venture investing, according to CB Insights.

Moreover, a few of Silicon Valley’s most prominent start-ups suffered signifi cant blows in the past year.

Theranos, the once highly lauded blood-testing company, laid off about 40% of its workers and closed its labora tory operations amid heightened skepticism about its technology.

Zenefits, a business software start-up, replaced its chief executive after BuzzFeed News reported on its use of unlicensed health insurance brokers. Zenefits has since settled investigations with a number of states, and the company has sought to turn itself around.

Of course, heavyweight start-ups had little trouble raising money. Uber alone raised $3.5 billion from the Kingdom of Saudi Arabia, putting its cash hoard from outside investors at more than $11 billion. Lyft, Palantir and Snap, the parent of Snapchat, all raised enormous sums as well, as did big non-American start-ups like the Chinese ride-hailing service Didi Chuxing.

And some startups sold out to bigger companies for multibillion-dollar valuations.Jet.com, an e-commerce company that began selling goods only within the last two years, sold itself to Walmart for $3.3 billion.

Investors are betting 2017 will be better. Re naissance Capital poin ted out that the average total return of IPOs in 2016 reached 23%, a sharp reversal from the nega tive 2.1% return of 2015 offerings and surpassing the 21% return of two years ago. ­

Source : The Economic Times (Delhi)
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Author:

Neeraj; an entrepreneur & a visionary in the field of Railway, Defense & Automobiles, is a graduate in commerce and a Harvard Business School Alumni. He’s an expert in govt. liasoning & contracting and has an exceptional network & connections at both local as well as global level. He’s an expert in Market Strategy & Planning and has served number of overseas companies as an advisor/consultant. He takes a profound interest in upcoming startups & is very receptive towards ground-breaking ideas & innovations. He likes to brainstorm those ideas and if the values & philosophies matches; he is even ready to invest his resources, serve as a mentor or act as an incubator to futuristic businesses.

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