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Just
nine tech companies last quarter became unicorns, or
venture-backed companies valued in the private market at $1
billion or more, according to data released on Thursday by CB
Insights, which tracks venture capital and angel investments
globally into private companies.
That compares to 23 companies that became unicorns in both the
second and third quarters last year.
"Sentiment got very negative" toward the end of the third
quarter, Anand Sanwal, CB Insights CEO and co-founder, said in
an email. "And while we expected that would manifest in the
funding stats, we were surprised to see the hit so quickly - in
just the next quarter."
With an abundance of cash available in the private market,
startups have stayed private much longer than in previous tech
booms, sustained by funding rounds of hundreds of millions, and
even billions, of dollars. Along the way, their valuations
swelled.
According to CB Insights, there are 144 unicorns globally with a
cumulative valuation of $525 billion.
But market turbulence last summer brought anxieties about those
valuations to the forefront, and investors began showing more
discretion.
San Francisco mobile payments company Square Inc took a 42
percent discount in its initial public offering in November,
stoking fears that the public market would not support highly
priced tech companies.
The data from CB Insights offers new evidence that investors
have responded by tightening their purse strings. In the fourth
quarter of last year, there were 39 financing deals of $100
million or more. There were 72 such deals in the third quarter
and 65 in the second quarter.
These so-called mega-deals first appeared in 2014, according to
venture capital analysts.
"Some of these big deals are cannibalizing what would have been
IPOs," said Tom Ciccolella, U.S. venture capital leader at
consulting firm PwC.
Overall venture capital funding fell 29 percent to $27.3 billion
in the fourth quarter from $38.7 billion in the third quarter.
The number of financing deals also dipped from 2,008 to 1,743.
North America remained the hub of venture capital activity,
outpacing Europe and Asia.
(Reporting by Heather Somerville; Editing by Bill Rigby)
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