VC funds are currently receiving money like they were back in the days of the dot-com boom — they are just spending it a lot more carefully this time.
All in all, U.S. VCs raised $41.6 billion in 2016, the biggest pick-up since 2001, according to data out of PitchBook and the National Venture Capital Association. At the same time as the funds were rolling in last year, however, startup investing was slowing markedly — and the number of venture-backed businesses that were acquired or went public dropped to its lowest point in seven years.
The conventional wisdom at this point is that VCs sitting on massive cash reserves are under renewed pressure to get their start-ups acquired or public ASAP — lest they are unable to carry on growing their fundraising among the endowments or pension funds that have poured cash into venture funds in recent years. Last year, 726 venture-backed companies were acquired or went public (and only 39 went public) the report said. Venture firms participated in 8,136 deals, compared with more than 10,000 in 2015 and 2014.
“It starts to hurt your M&A opportunities if there are fewer and fewer public companies,” said Bobby Franklin, the president of the VC trade group. “For the economic well-being of the U.S., we have to make sure we have a healthy entrepreneurial ecosystem.”
But 2017 may bring along with it some high-flying IPOs that could get things started — Snapchat being one high-profile example. Then again — 11 days in, and 2017 isn’t looking all that active just yet. The Bloomberg U.S. Startups Barometer, which tracks fundraising activity and exits by private companies, has fallen 22 percent in the last month.