Mad Money #66 - Was 2016 Really That Bad?

 

Everyone keeps saying what a bad year 2016 was. The Brexit and Trump votes, losing Bowie, Prince, Muhammad Ali and of course Alan Rickman.

And then there were the Venture Capital Figures.

In the US, the land of the VC, what they call Dollars and Deals were $58B and 4,520 respectively, which equated to a 20% and 16% drop. Not quite a cliff to fall off, but a fairly a sharp drumlin at the very least.

The fall was steepest in the last quarter and that’s before the Trump result was known. Quarterly Dollars and Deals both hit 8-quarter lows. So it looks like the momentum is all downhill right now.

However, America is not the World, despite what some would tell you in the finance industry. In fact Europe had a very good year with a 22% rise in the amount of VC investment. And the graph was still headed north in the last quarter with Dollars and Deals up 22% to reach $3B and nearly 500.

Mind you I wouldn’t get too complacent. Of the top ten VCs by investment in the year, 9 were in the USA and only one was in London.

Another interesting European statistic is that a quarter of all VC deals also included a corporation or its venture arm. This is a high and shows some of the restructuring which is working its way through our funding ecosystem.

Or as some might put it, big corporations are rubbish at innovating and so acquire to innovate. Either way, it’s good.

Another structural change was that Europe saw no new VC-backed unicorns (start-ups valued over $1B) in the last quarter and they were pretty scarce in the US as well. Most observers would see this as another positive sign and in fact the end of a bubble without some of the usual mess of a big burst.

In both America and Europe there were some sectors which did particularly well. For example artificial Intelligence investments rose 16% amidst the general US downturn.

If we look at our local scene figures are much harder to come by. One recent set was the Experian data for small deals in NI. Experian track the disclosed deals done by our law firms, so not a complete record by any means but a good indicator. They define small deals as £0.5m - £10m and in fact showed that that this was the only NI category to see increases in volume and value. The deals more than doubled in number and value invested reached £119m.

So, when you look at it a bit more evenly, it turns out that 2016 wasn’t all bad – at least for investment.

However the standout thing for me is that in Northern Ireland we just don’t know. Our local VCs tend to report their deals to the Irish Venture Capital Association. However incoming funds from the UK are attributed in England and of course many deals are kept private. So, in reality we don’t really have any complete figures here. Not a great situation and one which we, in Catalyst Inc, are considering taking on.

So, in the meantime, we can’t so much say that 2016 was a good or bad year. We have to say that it was more of a ‘we don’t know’ year.

Alan Watts is the Director of Halo the Angel PLUS Network run by Catalyst Inc (formerly the NI Science Park).