Austin’s Venture Capital Investment Deals Drop 7 Percent in 2016

Money Tree photo licensed from iStockPhoto.com

By LAURA LOREK
Reporter with Silicon Hills News

Venture capital investments in Austin dropped 7 percent in deal flow to 112 deals and $834 million invested in 2016, down 3 percent, compared to the previous year, according to the MoneyTree Report from PricewaterhouseCoopers.

Still, Austin outperformed the U.S. market which saw a drop of 16 percent in deals to 4,520 with $58.6 billion invested, down 20 percent, in 2016, compared to 2015.

The fourth quarter saw an even steeper decline in Austin with $11 million invested, down 26 percent, in 26 deals, down 10 percent, compared to the same quarter a year ago, according to the MoneyTree report.

The uncertainty around the presidential election may have contributed to the decrease in investment in 2016 compared to 2015 both nationally and locally, said Larry Westall, partner with PricewaterhouseCoopers, based in Austin.

“When I look at the Austin data and the types of companies that got funded this quarter, we, in Austin, remain in a good place,” Westall said. “We have good companies and quality deals that continue to get funded.”

Overall, 2017 was a solid year, Westall said.

“It was relatively flat in total dollars and deals,” he said. “The way I look at where we are at, 2017 should be another solid year. We expect the IPO market to rebound from where it was.”

Only 40 or so venture backed companies went public last year and only 15 of those were tech, Westall said.

“We’ll have more of a normalized year in 2017,” he said.

In Austin, the Internet industry captured the most investment for the fourth quarter and year with $51 million invested in 10 deals during the fourth quarter and $450 million invested in 59 deals during 2016, according to the MoneyTree Report. TrendKite landed $16.3 million in investment, making it the largest Internet deal in the fourth quarter.

Overall, the biggest deal in the fourth quarter was a $22 million investment in Phunware in the mobile and telecommunications industry. Phunware offers application development platforms.

In the fourth quarter of 2016, investors put $11.7 billion in U.S. venture capital-backed startup companies across 982 deals, down 17 percent in dollars and 14 percent in deals from the same quarter a year ago, according to the MoneyTree Report. This is the first time since the fourth quarter of 2011, that deal activity fell below 1,000 deals.

“Despite continued deceleration in venture capital investment activity, the startup ecosystem remains flush with quality deals,” Tom Ciccolella, US Venture Capital Leader at PwC said in a news release. “As industries continue to be disrupted by technology and Internet capabilities, new opportunities are emerging. It’s these opportunities, despite the decline, that continue to drive venture capital momentum.”

TOP 10 Austin VC Deals in the 2016 Fourth Quarter

Company Industry Venture Capital
Phunware Mobile & Telecommunications $22 million
Trendkite Internet $16.3 million
Twyla Internet $14 million
Hangar Technology Software $6.5 million
Isocline Engineering Corp. Software $6.3 million
M87 Mobile & Telecommunications $5 million
Chiron Health Internet $4.79 million
Factom Internet $4.19 million
Illumitex Electronics $4 million
Xeris Pharmaceuticals Healthcare $4 million

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