Venture capital cools in third quarter


Venture capital investments in American start-ups slowed in the the third quarter of 2015, a study released Friday showed.

But despite that slowdown, 2015's VC market is still track for one of its best years in almost two decades.

U.S. venture capitalists invested $16.3 billion in the third quarter of 2015, a report by PricewaterhouseCoopers, the National Venture Capital Association (NVCA) and Thomson Reuters said Friday. That figure marks a 5 percent decline from the $17.3 billion invested in the second quarter, the report said.

But venture capitalists still pumped $47.2 billion into the market so far this year. That level is higher than 17 of the last 20 years, and the third quarter marks the second-highest quarter in aggregate investment dollars since the fourth quarter of 2000, the report said.

The biotechnology and Internet-specific sectors that soared in the second quarter of 2015 stayed flat into the third quarter, while other sectors such as retail and media saw their share of funding tick upward. Software remained the top-grossing sector in the report, receiving $5.8 billion, though it saw a 21 percent quarter-on-quarter decline in dollars invested.

Late-stage investments reigned in the third quarter, increasing 10 percent to $4.4 billion and accounting for 19 percent of total deal volume for the quarter. The mid-stage companies that account for 24 percent of deals remained steady, and seed-stage investments rose 23 percent, though they still account for only 1 percent of investment dollars.

The modest shift in venture capital, the primary institutional funding pipeline of mid- to late-stage start-ups, comes on the heels of recent turbulence in the financial markets, Bobby Franklin, president and CEO of NVCA, said in a statement.

Major stock market averages closed about 7 percent lower for the third quarter, their worst since 2011. And venture capital firms raised about 34 percent fewer funds during that time period.

"The "investment appetite in new areas of innovation" remains robust, Tom Ciccolella, of PwC said in a statement, despite widespread jitters from high-profile venture capitalists and the stock market rout. Indeed, there are now 141 start-ups with private valuations of more than $1 billion, according to researchers at CB Insights, most of which were added in 2014 and 2015.

— CNBC's Evelyn Cheng contributed to this report.

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