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ALTERNATIVES

Venture capital investing down in 2016 despite highest fundraising in 10 years

Venture capital firms invested a total of $69.1 billion in 7,751 U.S. companies in 2016, down from $79.3 billion invested in 10,468 companies in 2015, reflecting a slowdown in investment in the second half of last year, according to the PitchBook-National Venture Capital Association Venture Monitor released Wednesday.

Venture capital firms invested $12.7 billion in 1,736 companies in the fourth quarter, down from a total of $15.7 billion in 1,965 deals in the third quarter and $16.9 billion in 2,354 transactions in the fourth quarter of 2015. There were 40% fewer rounds of financing of $100 million or more in U.S. companies by venture capital firms in 2016 — 59 large rounds in 2016, down from 98 in 2015.

Fundraising slowed at the end of the year of the year with $7.8 billion raised by 50 funds in the fourth quarter, down from $10.3 billion raised by 60 funds in the third quarter and $11.7 billion raised by 62 funds in the fourth quarter of 2015.

However, venture capital firms raised the most amount of capital in a year — $41.6 billion in 253 funds in 2016 — than in the past 10 years. By comparison, venture capital firms raised $35 billion in 255 funds in 2015. Seven venture capital managers raised funds with $1 billion or more of total capital in 2016. These firms included Andreessen Horowitz, Kleiner Perkins Caufield & Byers and Greylock Partners.

Meanwhile, exits from portfolio company investments slowed in 2016 with 726 exits valued at $46.8 billion in the year, down from 961 exits worth $50.4 billion in 2015. Much of the slowdown was in the fourth quarter, with 142 exits valued at a combined $6.8 billion, compared to 185 venture-backed exits valued at $15.4 billion in the third quarter and 220 exits worth a total of $16 billion in the fourth quarter of 2015.