business-meeting-1238188_960_72016 years after the dot-com boom, it appeared that the ever expanding world of technology had lost its luster. Promising unicorns began to die more quickly than new ones gained ground, and the overall interest in the largest singular market became rather bleak in terms of investment. Even major companies such as Linkedin witnessed a drop of 40% and the lowest price decrease in three years, at the beginning of this year, resulting in further market uncertainty and bearishness from VCs and institutions. However, that may have been temporary.

According to Reuters, tech companies saw $15.3 billion worth of investments in the second quarter of this year. This was a more than 20 percent increase in total investments compared to the first quarter, and 4th highest dollar amount since the year 2000. But what exactly is driving this growth in the face of such recent declines?

 

  1. Markets are more stable
    Cheap oil and China are largely to blame for a less than exciting first quarter of 2016. The Dow had its worst 4 day percentage loss since the 19th century, and many investments overall slowed significantly. It wasn’t until March that things started looking up, people became more comfortable and concerns about yet another recession were allayed. The Fed added a little comfort as well and decided not raise interest rates as much or as often as planned.
  2. Investors are more selective
    After more than a few burns, investors have become more particular about deciding where their money would perform most optimally. Instead of throwing cash at anything with hype, investors are putting more time into research and overall terms, focusing on quality over quantity. This general skepticism, which some experts have described as anxiety, has resulted in a decrease in the number of deals despite the increase in total investments.
  3. Valuations are lower
    In the first quarter of 2015, 15 companies had entered the coveted unicorn club, in which startups are valued at $1 billion or more. By that same time this year, the number had dropped to 5. While that’s not so exciting for those looking for high valuations which lead to more promising exits, it has helped secure better deals and such rarity is making the companies that do reach this level, more valuable.

Though early this year was upsetting, things are looking up for tech and for investors who love them, understanding the limitlessness of such developments. Things have certainly changed in the world of tech startups, but in many ways, it is creating a better, more rooted market which can result in more longevity than we’ve seen in recent years, as so many startups rose up from nothing only to fall flat.


Disclaimer: This document has been prepared by Manhattan Venture Partners (“MVP”) and includes information from other sources believed by MVP to be reliable. No representation or warranty, express or implied, is made as to the accuracy and completeness of any information set forth herein. This document may contain summaries of the terms of certain documents and agreements, but reference is made to the actual documents and agreements for the complete information contained therein. The information contained herein is as of the date hereof and is subject to change, completion or amendment without notice. This document contains statements, estimates and projections that may be deemed “forward-looking statements.” These statements, estimates and projections reflect various assumptions made by MVP or other sources concerning anticipated results, which may or may not prove to be correct. All statements contained herein that address operating performance, future direction, management and control, events or developments that are expected to occur in the future (including statements related to earnings, expectations, sales of assets, capital expenditures, or statements expressing general optimism about future operating results) are forward-looking statements. Actual results could differ materially from those reflected in the forward looking statements contained herein as a result of a variety of factors. The reader is responsible for verifying the accuracy of the data contained herein. MVP may seek to do business with companies covered in this material. As a result, readers should be aware that MVP may have a conflict of interest that could affect the objectivity of this material. This document does not contain all the information needed to make an investment decision, including but not limited to, the risks and costs. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument.

All securities transacted by MVP are through Fusion Analytics Securities LLC, a member of the Financial Industry Regulatory Authority.