During the second quarter venture capitalists invested $15.3 billion with the Software sector leading the way
Venture capitalist funding in the previous quarters has been slow due to lack of investor confidence toward startup companies. A new report published by MoneyTree suggests that venture capitalists invested $15.3 billion in startups in the second quarter of 2016 in 961 deals completed in the period.
The $15.3 billion funding in the period was led by Uber Technologies and Snapchat. Uber raised $3.5 billion while Snapchat secured $1.3 billion in funding rounds. These funds accounted for almost 33% of the total funds raised during the period. Uber got the funds from Saudi Arabia’s Investment Arm, while Snapchat's funding was led by Fidelty Investments.
This was the 10th consecutive quarter in which funding in a quarter has exceeded the $10 billion mark. The investment also show a 20% increase from the first quarter of the current year in which $12.7 billion were invested, which is a positive sign for startups. However, investment on a year-over-year (YoY) basis was down by 12%.
Total deals through which investment was done in the quarter were also down by 22% YoY. Deals were down 5% from 1,011 in the first quarter to 961 in the current quarter. The top 10 deals in the quarter accounted for 40% of the total investment received.
The main reason for this growth in investments as compared to the previous quarter is the involvement of more mutual and sovereign funds. Uber and Snapchat got their respective funding rounds from these sources as well. According to the report, this was the first time that any two startup companies raised a billion-dollar round in the same quarter.
The Software industry continued to thrive in the second quarter as well, and received the highest funding across all industries. It received $8.7 billion in 379 deals completed in the quarter. The software industry saw six funding rounds of $100 million or more, which is the most by any sector. The sector has seen most investments made for 27 straight quarters, according to the report.
The Biotech industry is in second place, with $1.7 billion in investments made in about 100 deals. IT followed with investments worth $946 million in 80 deals, while Media and Entertainment was fourth with $690 million in investments from 95 deals. Investments in the Financial Services sector fell 25% to $601 million only.
Earlier investors were hesitant to invest in startups as the majority of startups would get huge investments and then fail to live up to expectations. Investors are more confident in putting their money in startups that are already established, such as Uber and Snapchat, and have a sustainable business model.