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Where are the unicorns?
Where are the unicorns?

Unicorns may once again be living up to their name.

The elusive creatures — which in venture capital parlance means privately-held companies valued at more than $1 billion — are not appearing with as much regularity as they once did, signaling a cool down in what some believed was an overheated startup market.

Globally, investments declined 14 percent compared to the third quarter as fewer companies raised “mega-deals” of $100 million or more. There were just 34 deals of $100 million or more during the third quarter, compared to 73 deals of that size in the third quarter of 2015.

Total funding came in at $24.1 billion for the third quarter, the lowest tally in two years.

In fact, Bellevue-based OfferUp — which closed a massive round during the quarter of $119 million — was in rare company during the quarter, as fewer companies raised capital at valuations of $1 billion or more.

Source: CB Insights

Even with that decline, experts says that things aren’t totally bleak.

“Before everyone starts saying the sky is falling, it’s worth noting that a bit of sobriety is a good thing,” said Anand Sanwal, CEO of CB Insights. “2015 funding levels were irrationally high with a new unicorn being birthed every 3rd day as investors were keen to force-feed perceived startup winners with cash.”

In the Pacific Northwest, venture capitalists pumped $380 million into 37 investments during the third quarter of 2016, an uptick in investments over the previous quarter but down 22 percent over the same period in 2015, according to the VenturePulse report from CB Insights and KPMG.

Source: CB Insights

Several large deals — including a $119 million investment in online classifieds marketplace OfferUp and a $50 million growth round in sales tax automation provider Avalara — added to the third quarter totals in the region.

By comparison, VCs invested $7.2 billion in California companies during the quarter, and $2.2 billion in Massachusetts companies.

Venture capital investments in California, Massachusetts and New York.
Venture capital investments in California, Massachusetts and New York. Source: CB Insights.

The Venture Pulse report from KPMG and CB Insights comes amid a number of venture capital reports, including the Venture Monitor report from Pitchbook and the National Venture Capital Association, released last week. Here’s the headline from that report: VC funding dips for 5th-straight quarter; 2016 investments reach $56B; IPOs still scarce.

In addition, the VentureSource report from Dow Jones was released late Wednesday. It found that $11.72 billion was invested in 956 deals in the U.S. during the third quarter, a 28 percent decline over the previous quarter. It also found that 12 venture-backed companies, including Bellevue-based Apptio, went public in the third quarter, an increase of 20 percent over the previous quarter.

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