Venture capital fundraising dips in third quarter, but on pace for record year

Venture capital firms and other investors including angels, accelerators and incubators invested $15 billion in 1,796 companies in the third quarter, the fifth straight quarterly decline in the number of companies receiving venture capital financing, said National Venture Capital Association and research firm PitchBook.

This is the first report issued by NVCA with PitchBook as its data provider. Unlike past reports, this report includes data from angel investors, accelerators and incubators along with venture capital fund managers.

The number of transactions declined in the third quarter by 11% from 2,026 deals in the second quarter and by 29% from 2,545 in the third quarter of last year.

The amount of capital invested also fell in the third quarter by 32% from $22 billion in the second quarter and by 29% from $21.1 billion in the third quarter of 2015.

Venture capital fundraising is on pace to make 2016 a record-breaking year with 201 funds raising a combined $32.4 billion in the first three quarters of this year, compared to the 251 funds that raised a total of $36.1 billion in all of 2015.

In the third quarter, 56 venture capital funds raised $9 billion, with the amount of capital down 33% from the second quarter when 77 funds raised $13.4 billion. However, capital raised in the quarter is up 125% from the 53 funds that raised $4 billion in the third quarter of last year.

In terms of exits, 91% of venture-backed companies were sold in an acquisition or buyout in the third quarter. So far this year, there were 433 acquisitions of venture-backed companies, 70 buyouts and 32 initial public offerings. By comparison, there were 755 acquisitions, 109 buyouts and 76 IPOs in all of 2015.

In the first three quarter of 2016, the median disclosed venture capital-backed exit size for acquisitions and buyouts was $100 million, a record amount in the data set's six-year history, up from $50 million last year. By contrast, the median IPO value in the first three quarters of 2016 was $67.2 million, down from $75.9 million in 2015.