2015 venture capital trends summary
Deal flow in the venture capital industry registered at an all-time high in 2015
INSIGHT ARTICLE |
Deal flow in the venture capital industry registered at an all-time high in 2015, with deal numbers not seen since the dot-com bubble in 2000. This was mainly fueled by the record exits that occurred in 2014, both through the initial public offering (IPO) process and mergers and acquisitions (M&A) deals.
This created a condition of euphoria among fund managers, who were willing to invest in deals at higher pre-money valuations in companies that could be the next Twitter, Facebook or WhatsApp. The pre-money valuations of Series B rounds and later series increased by over 50 percent compared to 2014.
Even the pre-money valuations for Series A increased by more than 20 percent compared to the prior year. This resulted in bumping up the entry prices of investment across the board. Thus, fund managers did not want to exit unless they made a reasonable return on their investment. They looked for buyers who gave them a premium and did not settle for break-even exits. However, the exit markets were not as buoyant in 2015 as they were in 2014, which may have an impact on deal flow in 2016.