A recent WSJ article tells us that there has been an increase in Venture Capital funding and 2015 saw the highest amount of money raised through VC funding since 2000. The article notes that VC continues to be popular among companies because of the volatile market. Companies can now raise high amounts of capital rather than going public and relying on the secondary resale market.The author notes, “Investors have stayed excited about venture capital because it offers higher growth in a low-return environment.”With the market’s volatility continuing maybe 2016 will see even more VC funding.
http://www.wsj.com/articles/funds-flow-to-venture-firms-1459295426
This was a really interesting article. It is interesting to see the highest level of investment in VC in 15 years, but I guess it makes sense. For one, VC funding is much more available than it used to be. Second, I agree with you Nora, that with the market being so turbulent over the last year, investment in public companies is less attractive. Private companies can avoid the market swings in stock price (I guess at least in theory) by remaining private.
It so cool to watch how investment money moves around looking for growth. When the stock market is so volatile, investments move elsewhere to escape from potential stock plunges. Also, with government securities yielding near zero, there has been an exit from safer investments into these start-ups. I find this fascinating, because many of the “unicorn” companies are now being referred to as “unicorpses” after recently being devalued. To see VC funding continuing at such a pace into these skeptical start-ups details how desperate investors are to find returns.
I saw a similar article about this recently that noted this increase could be problematic for the future of venture funding. It could mean the funds are lowering their standards on companies to invest in, which definitely adds to the argument about the tech industry bubble.