Venture Capitals are showing great interest to invest on startups and established businesses around the globe. Worldwide, venture capitals had invested US$128.5 billion in 2015.
The figure comparison of venture investments for the years 2014 and 2015 clearly shows that the investment scenario is booming. We can see that there was 44% increase in the investments made from VCs, and VCs have raised US$89 billion in 2014, which was further increased to US$128 billion in 2015. The annual financing trends to VC – backed companies in FY2011-15 can be seen below:
The Drop-off
Even though there is a healthy increase in investments made through the above mentioned five-year period, there is a little drop-off in the number of companies/business backed-up by VC investments for FY2014 and FY 2015, as shown below;
This drop-off was remarkable in Asia, where India and China had received remarkably less funding in 2015 compared to the previous years. Major reasons for the drop-off were an
uncertain economy, a pre-estimated slowdown in China, and expected interest rate increases following the recent rate increase in the U.S.
The Bounce Back
In Q4, funding in China fell 29% from the prior quarter to US$7.2 billion. India also saw a pullback, with number of deals falling 46%, and funding amounts dropping 18% from the third to the fourth quarter. Even though there was a fall of an overall 32% between the last two quarters in Asian funding scenario, the region still managed to raise US$39.7 billion in deals in 2015. This is more than what had been a record for the previous four years, put together.
Top Trending Industries
Information Technology (IT) tops the lists among the industries that attract high investments globally. In particular, cybersecurity is one such sub-industrial segment that managed to attract good investments. Globally, venture-backed cybersecurity companies raised $1.9 billion in 2014. The cybersecurity startups managed to raise up to US$1.2 billion in just first six months of 2015. Allegis Capital, a leading seed and early stage VC investor in companies building disruptive and innovative cybersecurity solutions for the global digital economy, has raised a $100 million fund to back cybersecurity startups.
CrowdStrike, a provider of the first true Software-as-a Service (SaaS) based next-generation endpoint protection platform, completed a $100 million Series C financing round, led by Google Capital. Rackspace, a CrowdStrike customer, also participated in the round along with existing investors Accel and Warburg Pincus. The total investment for the company sums up to $156 million.
Space industry is another segment that witnessed good investment opportunities. VCs invested US$1.8 billion in space-based startups in 2015. It is twice the amount invested in this industry for the past 15 years combined together. This can be considered due to facts such as success of market leaders SpaceX and Blue Origin. Blue Origin was focused on developing sub-orbital spaceflight, while SpaceX was founded to create orbital rocket launch. Both companies are targeted to create a reusable rocket technology for space shuttle. SpaceX is a startup owned by Elon Musk. On April 27, 2015, Falcon 9 lifted off from SpaceX’s Launch Complex 40 at Cape Canaveral Air Force Station carrying the TurkmenÄlem52E/MonacoSat satellite for Thales Alenia Space. Success of these leaders have given way for new startups to enter into the market, forming a brand new technical sector in the industry. Investors are hence not considering space companies as ‘dangerous’ to invest.
New space startups such as Spire, Planet Labs, Mapbox, BlackSky Global, and Orbital Insight were founded with different positioning than SpaceX and Blue Origin. They successfully attracted venture investment with space-based data, for example, in building and managing constellations of imaging data from satellites or managing and crunching data collected from satellites.
Conclusion
There are a lot of opportunities existing for the startups around the globe to raise funds, as we could see the amount of inclination the VCs have towards investing into these startups, especially from IT. It can be expected that the scenario will keep improving as the globalized business networks tend to back up themselves to extract the potentials in the market by delivering values that are utmost in necessity for the business and consumer chains across the globe.
This article is written by Bhoopal, Sr. Research Analyst, DART Consulting
