$20bn in VC funds for mobile and telcos vanishes overnight
KPMG and CB Insights (CBI) have published their Venture Pulse Q4 report, which looks at the trends inside the global venture capital community. It found that 2015 was a record year for investment, with over $128bn invested across 7,872 deals, up 44% from 2014’s total.
But the stalwart technology sectors are receiving less interest from investors, as the global VC industry turns its attention to newer, shinier opportunities. According to the figures, the Mobile and Telecommunications segment saw $5bn per quarter vanish from investment last year, which is a looming issue for future innovation, since start-ups and successful exits are often the source of the more disruptive technologies in the mobile, video and networking markets.
The Internet sector grew from 46% of the total funds in Q4 2014 to 50% in Q4 2015, while Mobile and Telecommunications shrank from 20% to 16% in the same period. Healthcare stood at 13% at the end of last year, with Consumer Products and Services at 4% and Software (non-internet/mobile) flat at 6% (‘Other’ accounted for 12%).
Based on these demographics, technology as a whole shows no sign of diminishing in importance to VCs, but that four-point shrink in Mobile and Telco accounts for $5.1bn per quarter or over $20bn which was lost to the sector in 2015. That’s a very significant chunk of money that is no longer chasing the communications opportunity. While late-stage IPOs will account for much of that figure, early-stage investments will also take a hit, and those can be the most influential in terms of disruption.
The global drop in total investment was most noticeable in China and India, while Europe saw the smallest decrease in VC activity in Q4, although it remains a significantly smaller market than Asia or North America.
KPMG and CBI believe that this decline signifies a shift in thinking, “as global investors seem to be taking a less bullish view of the market. An uncertain global economy, a projected slowdown in China, and expected interest rate increases following the recent increase in the US seem to be driving some investors to hold back their dollars.”