New England has seen a steep decline in both VC deal count and overall deal value during the past two quarters, after seeing a high in both categories in 3Q 2015, according to PitchBook data. 1Q 2016 deal activity fell to the lowest point since the end of 2010, when just 137 deals were closed in the region (64 deals have been completed thus far in 2Q). Likewise, deal value hit its lowest total in six quarters, falling to $1.7 billion. New England’s late-stage deals are being completed at the slowest rate in six years, due to several possible factors including a low supply of companies looking to raise late-stage capital, investments taking longer to close and late-stage investors simply being much more selective after several quarters of high activity. 38 late-stage rounds were raised in 1Q; for context, 2015 accounted for 220. Altogether, there were 157 deals completed at all stages in 1Q, putting 2016 on pace to see the lowest number of VC investments since 2010.
VC activity in the U.S. New England region
It should be noted, however, that through the first quarter median deal sizes were up over 2015 numbers at every stage. Investors have focused on quality investments, making sure a startup’s path to profitability and actual revenues are well in place before striking a deal. That strategy has helped drive deal prices higher, even if investors are still excersizing caution over inflated valuations.
The New England region has quietly attracted major growth in VC interest through its tech community. Just a few years ago, the area was known for its healthcare industry. But since 2010, VC investment in IT has risen each year by both deal count and deal value, with the latter falling just $200 million short of ‘tech hub’ New York’s IT investment total in 2015. New England is also now home to four unicorns, DraftKings ($2B valuation), Actifio ($1.1B), Datto ($1B) and SimpliVity ($1B).