Cashback News – May 13: VCs – Where’s the money going in Q1, 2016?

Cashback News – May 13: VCs – Where’s the money going in Q1, 2016?

- in Slider, VC, Mergers, Acquisitions

VC money in 2016E-commerce, technology companies and startups depend on venture capital for growth, market development and marketing. Today, we take a look at recent VC news, developments and some interesting insights. While e-commerce is only 7% of retail sales in the US, CB Insights scopes out 75 startups that are reshaping how and where consumers buy online. Entrepreneur and VC Sam Friend relates a cautionary tale about startups and how $70 million in investment disappeared as try to compete globally instead of focusing on its EU base.

VCCEdge reports $2.29 billion was invested in 319 Indian companies in Q1 2016 – down 50% compared with Q4 2015. According to VCCircle PE-VC Outlook Survey 2016, software as a service could be the new big VC investment trend in India. The Chinese government is the big VC behind Ant Financial, the digital payments arm of Alibaba, which is now the world’s second highest valued startup behind Uber after raising $4.5 billion. Chinese regulators may close the door on overseas Chinese companies relisting in China to take advantage of higher valuations according to a Bloomberg report.

KPMG report highlights a pullback to $14.8 billion in VC investment in the US in Q1 2016. Venture capitalist Bryan Roberts talks about the trends in healthcare worth watching by VCs. VC Scott Shane looks at 2016 trends in venture capital investment, in particular what he calls a “right-sizingtrendPhilippine government officials are urging VCs to invest in local startups as the country continues its innovation growth.

Next-Generation Commerce: 75 Startups Reshaping How and Where We Buy Consumer Goods represents just 7% of retail sales in the US market, but it has grown consistently, and it’s just one of many new points of product distribution that consumer packaged goods companies need to be considering. Others include concierge and on-demand delivery services, home automation platforms, point-of-sale marketing, and more. In some cases, the individual consumer is giving up control of the ultimate brand selection to these services, in favor of convenience. This dynamic challenges CPG companies accustomed to traditional retail partners and in-store marketing.

We used CB Insights data to map out the many different companies that are reshaping the future of distribution, consumer decision-making, and buying behavior around consumer packaged goods. For an explanation of each category, see below. Via – How to make $70m disappear….“We’re thrilled to announce that we’ve been acquired by TripAdvisor, the world’s largest travel website.” housetrip email – 27 April 2016

I wasn’t thrilled I was crying into my morning coffee.

As an early angel investor in I’d seen my 50k investment rise to over 1m and then disappear. Rather than the bland “sold for an undisclosed amount” headline I thought it would be more useful to carry out a public post mortem so we can all learn from the mistakes and avoid them in the future. via LinkedIn Pulse

Private equity & venture capital deal activity takes a hit in Q1 2016 investment activity started on a tepid note in 2016 with private equity dealmaking staying weak while venture capital firms turning cautious on backing startups in the first three months.

Investors shelled out $2.29 billion across 319 firms in the January-March quarter, according to preliminary data compiled by VCCEdge, the financial research platform of VCCircle. The total investment value halved and the number of firms that attracted capital fell by a fifth compared with the preceding quarter. The numbers also dropped compared with the same quarter last year (see chart).

While the overall data show private investments at large got off to a poor start in 2016, there is one distinct trend for startups. Angel and seed-stage investors are backing more ventures than ever before, writing a cheque for startups every 12 hours this year as against every 16 hours a year earlier. In contrast, institutional VC deals have fallen by a third from a year earlier when big-ticket funding transactions involving Ola, ShopClues and FreeCharge (before it was acquired by Snapdeal) had boosted the investment value. Via

Seed investments sweet spot for VCs: VCCircle PE-VC Outlook Survey 2016

Seed investments sweet spot for VCsThe past couple of years may have been about the rapid rise of e-commerce startups but the year ahead will likely see software-as-a-service providers emerge as one of the favourites of investors, according to the VCCircle PE-VC Outlook Survey 2016. The survey also found that investors will largely focus on seed funding rounds this year and many will be cautious about investing in subsequent rounds. Take a detailed look at the survey’s findings.

Startup valuations will ease and there will be greater focus on profitability this year finds the VCCircle PE/VC Outlook Survey 2016. Via

Ant Financial is Part of the Chinese Government’s Big VC bet Financial, the digital payments offshoot of Alibaba, is now the world’s second highest valued startup behind Uber after raising $4.5 billion yesterday at a $60 billion valuation.

Since Ant’s core product Alipay releases little financial information, it’s unclear what this valuation is based upon other than the Chinese government’s belief that Alipay is something really special.

That’s because the fundraising round wasn’t led by venture capitalists, but rather by Chinese state-controlled funds. The sovereign-wealth fund China Investment Corp. and state-bank China Construction BankCorp were the top donors, Ant said. This comes one year after Ant raised a reported $2 billion from the country’s National Social Security Fund and a gaggle of state insurance companies. Via

Memo to China’s prodigal offshore companies trading isn’t the only speculative frenzy unraveling in China. The rush to finance takeovers of overseas-traded Chinese companies so they can go public back home is fast losing favor. First, China scrapped plans for a startup board that would have provided a venue for the returnees, as well as shelving a more market-oriented IPO mechanism that would have facilitated share sales.

Now the securities regulator is considering measures to curb backdoor listings by companies that previously traded offshore, people with knowledge of the matter told Bloomberg News. The rapidly closing door will be a painful reality check. About 50 U.S.- and Hong Kong-listed companies have announced plans to go private with the aim of relisting in China. Already, share prices of many of these debt-fueled buyout candidates have begun tanking.

In the U.S., at least 47 Chinese companies have announced plans to go private since January last year, through offers valued at a combined $43 billion. Many have been spurred by one thought alone — relisting in China, where valuations are almost three times as high. Via


US Venture Capital Pullback Continues in Q1 2016: KPMG Report into venture capital (VC)-backed companies in the United States has slowed in back-to-back quarters, according to Venture Pulse, the quarterly global report on VC trends published jointly by KPMG International and CB Insights.

The U.S. saw only $14.8 billion invested in Q1’16, a slight increase (six percent) from Q4’15, while the number of actual deals declined, slipping an additional two percent from last quarter to 1,035 deals. These two quarters are a major slowdown from an otherwise record year for VC investment in FY15.

“Though we feel there is a considerable amount of dry powder in the market, overall concerns around the global economy and a decline in valuations are leading investors to be far more selective,” said Brian Hughes, National Co-Lead Partner, KPMG LLP’s Venture Capital Practice. “VC investors are looking for performance rather than possibility.”

According to the report, seed-stage investments fell to less than a quarter of all deals in Q1’16, dropping to a five-quarter low of 22 percent. Series A rounds actually outpaced seed deals for the quarter, reversing the trend of previous quarters Via

The Trends VCs Should Be Watching in Health Care Roberts has built a career on picking winners in the health–care industry. The seasoned venture capitalist and partner at Venrock has invested in startups across almost all health–care categories. In the past few years alone, he’s lead several billion-dollar exits.

On a more personal note, I’ve known Bryan for 20 years. He’s the rare individual who combines deep core-subject expertise with a supercharged imagination, an almost radical sense of self-confidence, and a loyal dedication to his entrepreneurs and their ideas.

I spoke with Roberts about the trends VCs should be watching in health care. The interview has been edited for clarity and length. Via

More Venture Capital Trends my recent article titled, “The Venture Capital Industry is Still Rightsizing,” this week let’s turn to venture capital trends and commitments and the number of companies financed.

2016 Venture Capital Trends
Figure 1 shows venture capital commitments — the amount of money that the industry has invested in startup companies measured in inflation-adjusted dollars — from 1980 to 2014. The dotted line in the figure is the five-year moving average.

Since the venture capital bubble burst in 2001, the trend in venture capital commitments has been largely downward, with a slight rise in the pre-financial crisis period. The most recent year data are available, 2014, shows an uptick, reversing the downward trend in the moving average.

Overall, the pattern for venture capital commitments is consistent with the story of continued rightsizing in the industry that I described in my earlier post. While not nearly as consistent as the patterns for capital under management, the number of VC funds and average fund size, inflation-adjusted venture capital commitments in the wake of the Internet 1.0 bubble have trended back towards their levels in the 1990s. Via

PH govt urges VCs to invest in startups Philippines’ Department of Trade and Industry (DTI) is urging venture capitalists to invest in local startups as the country continues to improve its position on the global innovation index. DTI reported that the Philippines climbed to 83rd rank from its 100th position in the 2015 global innovation index of the World Intellectual Property Organization (WIPO).

“There is no better time for the Philippines than now,” said DTI Industry Promotion Group (IPG) undersecretary Nora Terrado, noting promotional initiatives for startups and innovation in the Philippines continue to add up. Via

More VC coverage ahead

You can expect to see regular coverage of global venture-capital news and trends in the Cashback Industry News. If you’re enjoying these weekday news updates, you can get them in your inbox for free by subscribing at the top of this page. Have an enjoyable weekend and we’ll be back Monday with more news you can use.

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