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A joint report published by KPMG International and CB Insights, startup funding showed some interesting facts about deal activity in Asia and across the globe. Following are some key points -
- More Seed deals in Asia - Asian seed deal share rose to a 5-quarter high of 39% in Q2'16, up from 33% the quarter prior. In absolute terms, seed deals held relatively steady from Q1'16, while most other stages fell
- North American lull - After a slight uptick in deal activity in Q1'16, North America saw another sharp drop in Q2'16, with just 1117 deals into VC-backed companies.
- Second quarter of saw venture capital funding activity rise slightly following 2 quarters of declines, while deal activity fell for the fourth consecutive quarter.
- Large rounds by companies like Uber, Snapchat and Didi Chuxing helped buoy investment despite the ongoing decline in the number of deals.
- The Brexit referendum in the UK caused many investors to hold back from making significant investments, over the quarter, specifically in the UK
- The upcoming US presidential election, the potential increase in US interest rates, and an economic slowdown in China also added to investor caution.
- Deal activity had already slowed noticeably in Q4'15 and Q1'16 but global financings dropped a further 6% in Q2'16, down to 1886. Deal count fell in both Asia and North America, though it rose slightly in Europe.
- 2015 saw investors write many $100M+ checks into private tech companies thanks to crossover investors, corporates and other-deep pocketed investors entering private markets. 2016 has seen that trend cool significantly, with North America seeing just 14 $100M+ rounds in Q2'16 compared to 37 in Q3'15.
- IPO exits remained low in Q2'16. Given the retrenchment in share prices among tech companies in 2015, many companies are holding off from considering an IPO or are looking at M&A as an attractive exit strategy. Of the 10 biggest IPOs in 2015, approximately two-thirds are now trading below their offering price.
- VC investment in North America is likely to remain uneven heading into Q3, as market uncertainties such as the US presidential election continue to drive uncertainty.