Quantum computing and biotech outpace AI and blockchain among investors and consumers

Quantum computing and biotech star in a new report from Boston Consulting Group today that takes an in-depth look at the emerging “deep tech” …

Quantum computing and biotech star in a new report from Boston Consulting Group today that takes an in-depth look at the emerging “deep tech” ecosystem, new and emerging technologies quickly gaining attention from investors and consumers alike.

“The Dawn of the Deep Tech Ecosystem” report spans four years, 10 countries, a survey of more than 2,000 startups and seven areas of deep tech investment: advanced materials, artificial intelligence, biotech, blockchain, drones and robotics, photonics and electronics, and quantum computing.

The report found that from 2015 to 2018, quantum computing and biotech outpaced AI and blockchain in private investment funding, with 2018 the highest year of capital investment in deep-tech startups. Investment in the sector increased more than 20 percent per year from 2015 through 2018, when it reached almost $18 billion.

On a country-by-country basis, the big national players dominate the space but by no means own the playing field.

Although 53 percent of all deep tech companies in the study are based in the U.S., the report finds that both the number of U.S. firms and their share of global deep tech have been declining in recent years.

Part of that shift is credited to government spending. While the Chinese government increased research and development funding by 62 percent over the period, government funding in the U.S. declined 6 percent.

“Three attributes characterize deep tech in a business context,” the report explains. “These technologies can have a big impact, take a long time to reach market-ready maturity and require a significant amount of capital.”

Moreover, the report says, “Deep technologies are novel and are significant advances over technologies currently in use.” As a result, they require “concerted R&D” to develop practical business or consumer applications.

“Many of these technologies address big societal and environmental challenges and will likely shape the way we solve some of the most pressing global problems,” the report adds. “These technologies have the power to create their own markets or disrupt existing industries. The underlying IP is either hard to reproduce or well protected, so they often have a valuable competitive advantage or barrier to entry.”

Image: Boston Consulting Group

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Ways to raise capital for your business

A business venture founder with strong social capital means he or she possesses strong individual skills in building networks within and outside the …

Attend a pitching event at one of Kenya’s business start-up hubs whether, at NaiLab, iHub, USIU-A, or Nairobi Garage, among others, and one will notice numerous budding entrepreneurs fixated on funding needs. But capital comes in many different types, not always monetary funding.

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Decade In Review: Trends In Seed And Early Stage Funding

As Fred Wilson from Union Square Ventures notes, “In the first five years of this decade, we saw the seed portion of the market explode. In the last five …

We’ve decided to step back from the breaking news for a minute to conduct a review of seed and early-stage funding trends over the last decade for U.S.-based companies.

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I’m fairly certain we can all agree that the environment for startups has changed dramatically in the past 10 years, specifically in two major ways:

  1. The development of seed funding as its own class and;
  2. The expansion of growth stage investing.

What we’ve also seen are recent concerns raised about the decline in seed stage funding by Mark Suster, a Partner at UpFront Ventures, as there has not been commensurate growth in early stage funding (Series A and B), to meet this growth in seed-financed companies. This is often expressed as the Series A crunch.

So with venture funding at an all time high, along with increased growth in supergiant rounds, now seems like an appropriate time to conduct this kind of review.

Setting The Stage

First, let’s set the stage for our analysis and explain where our data comes from with a few quick facts:

  • Rounds below $1 million can be the most difficult to capture adequately as many angel and pre-seed deals are not reported.
  • Luckily, Crunchbase has an “active founder community” that adds early stage financings.
  • By “active founder community” we are referring to many founders who are active on Crunchbase adding their company, themselves as founders, and their fundings.
  • Around 47 percent of fundings below $5 million in the U.S. are added by contributors, as distinct from our analyst teams who process the news, track Twitter, and work directly with our venture partners.
  • For this study, we bucket U.S. funding rounds by size to indicate stage.
  • Given the high percentage of self-reported seed financing, data added after the end of a quarter needs to be factored in.
  • For this reason we use projected data for many of the Crunchbase quarterly reports in order to more accurately reflect recent funding trends. For the charts below we are using actual data, with some provisions for the data lag when discussing the trends.

Now, let’s take a look at the trends.

Trend: Rounds Below $1 Million Are Slumping

Since 2014 we have seen mostly double-digit declines in less than $1 million rounds each year – a strong pivot from 2008-2014 when we saw double-digit growth.

In 2018 seed funding counts and amounts below $1 million were down from 2015 at 41 and 35 percent respectively. Given that data at this stage can be added long after the round took place, we assess there could be a 20 percentage-point relative increase in 2018 compared to 2017.

If we factor this in, 2018 seed funding counts and amounts below $1 million are down from 2015 at 30 and 23 percent respectively. In other words, seed below $1 million are closer to 2012 and 2017 levels.

Trend: $1 Million to $5 Million Rounds Are Flattening

Round from $1 million to $5 million also experienced growth from 2008 through 2015, more than threefold for counts and close to threefold for amounts. Upward growth stalled from 2015. However, we do not see a substantial downward trend in the last three years. Dollars invested are stable at $7.5 billion from 2015 through 2017. Counts and amounts are down in 2018 from the 2015 height by 12 percent for deal count and 6 percent for amounts.

At Crunchbase we are always cautious about reporting downward trends for the most recent year or quarter, as data does flow in after the close of the most recent time period. If the trend is over a greater time period, that is a stronger signal for change in the market. Based on data continuing to be added after the end of a year for the previous year, we assess around 10 percentage point increase relative to 2017. This would make 2018 roughly equivalent to 2017 on rounds and slightly up on amounts.

Trend: Seed Funds Take Bigger Stakes

Why is seed flattening? Seed investors report putting more dollars into fewer deals. Or as they raise more substantial subsequent funds, they are putting more dollars into the same number of transactions. Seed funds need to get enough equity for a meaningful stake, should a startup survive to raise subsequent rounds. Seed funds are investing in fewer startups for more equity.

Trend: Larger Venture Funds Taking A Less Active Role in Seed

UpFront Ventures’ Suster (referenced earlier) also talks about larger venture firms becoming less active in seed, as investing at the seed stage can limit their ability down the road to invest in competitive startups who emerge as growing contenders in a specific sector. The growth of more substantial funds in venture allows firms to see deals mature before investing, perhaps paying more to get the equity they want, and allowing startups not growing as quickly to fail or get acquired.

As Fred Wilson from Union Square Ventures notes, “In the first five years of this decade, we saw the seed portion of the market explode. In the last five years of this decade we saw the growth portion of the market explode. But over those last ten years, the middle part, the traditional venture capital market, has not changed much.”

Trend: The Middle Is Growing

For the middle, Series A and B rounds (which used to be the first institutional money in), the market for $5 to $10 million rounds has almost doubled, but it has taken 11 years from 2008 to 2018. In that same 11 year period, growth has been slower than round below $5 million. Growth has continued past 2015. Since 2015 rounds are down slightly for one year, and then continue to grow in 2017 and 2018. Counts are up from 2015 by 17 percent and dollars by 18 percent.

Trend: $10 To $25 Million Rounds Are Growing

Rounds of $10 million to $25 million have grown over 11 years by 73 percentage points for counts, and 78 percentage points for amounts. This is a slower pace than $5 million to $10 million rounds, but continuing to edge up year over year

Trend: Seed Is Maturing

Seed is its own class that is here to stay. Indeed pre-seed, seed and seed extension all seem to have specific dynamics. Of the 600+ active seed funds who have raised a fund below $100 millions, close to half have raised more than one fund. In the last three years in the U.S. we have not seen a slowing of seed funds raised for $100 million dollars and below.

In Conclusion

When we take into account the data lag, dollars for below $5 million is projected to be $8.5 billion, close to the height in 2015 of $8.6 billion. Deal counts are down from the height by a fifth, which does mean less seed funded startups in the U.S. Provided that capital allocation greater than $5 million continues to grow, less seed funded startups will die before raising a Series A. More companies have a chance to succeed, which is good for seed funds, and ultimately for the whole ecosystem.

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The AlleyWatch NYC Startup Daily Funding Report: 3/13/19

… platform for financial institutions to interact with their customers, has raised an additional $20M in Series B funding led by Insight Venture Partners.

The latest venture capital, seed, and angel deals for NYC startups for 3/13/19 featuring funding details for Newslea, Glia, and much more. This page will be updated throughout the day to reflect any new fundings.

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3 Signs Your Startup Might Die, Taken From Startups That Actually Did Die

Here’s how CB Insights explained its death: “Airware will serve as cautionary tale of (a) startup overspending in hopes of finding product-market fit.
March 13, 2019 5 min read
Opinions expressed by Entrepreneur contributors are their own.

It’s old news that startups die often, fast and hard. Whatever stats you set store by — the one that says 75 percent of venture-backed startups fail or the one about 50 percent of all businesses failing within five years — the conclusion is the same: Your startup has a statistically unfavorable road ahead.

Related: Tech That Will (Probably) Die in 2018

Of course, that doesn’t necessarily mean you should flip a u-turn at the next street and cut your losses (though it might). Every business is different, and how your particular startup performs over the long run depends on a slew of factors happening right now.

Those factors include how well your product resonates with your market, how healthy your ROI is, even how well you as leader are shifting to meet the demands of an unpredictable marketplace.

The truth is, sometimes cutting tail and running may be your best option, giving you the time and energy to start a more viable (and profitable) business elsewhere. In the words of Tim Ferriss, “Being able to quit things that don’t work is integral to being a winner.”

With that in mind, here are three signs your startup is on its last legs — signs pulled directly from startups whose founders left them dead and buried.

Related: Continue to Innovate Your Products, or Die a Slow Death

1. You’re drowning in a negative ROI.

At its core, business is simple. You spend money to make money. And ideally, you make more money than you spend. Unfortunately, many businesses close their doors for one dead-simple reason: They’re not making a healthy profit. And a suffering ROI can happen for a lot of different reasons.

Sometimes, a lofty overhead and under-priced products create that negative ROI. Other times, poorly managed finances — you’ve hired too many people or bought too many tools before your business is ready — does the trick.

Airware, for example, a startup that had over $100 million backing it, shut down due to overspending. Here’s how CB Insights explained its death: “Airware will serve as cautionary tale of (a) startup overspending in hopes of finding product-market fit. Had it been more frugal, saved cash to extend its runway and given corporate clients more time to figure out how to use drones, Airware might have stayed afloat.”

Anthony Walsh, the founder of the health supplement startup EcoLife, in an email echoed this idea of initial frguality. “Unfortunately, many entrepreneurs don’t realize that a business needs to have a healthy ROI from the beginning [emphasis mine],” Walsh wrote. “Lots of entrepreneurs think it’s just a matter of time until their business succeeds. ‘I’ll just wait it out,’ they think. But if the business isn’t making money, then you have a problem — a serious one.”

2. You’re a generalist.

It’s tempting to build a business that serves everyone …

The bigger the market, the more potential for making money, right? Wrong.

In reality, the more finite your niche, the easier it’ll be to advertise, market and sell your products. Just because your business can serve multiple markets doesn’t mean that it should, especially not in the beginning. It’s much easier to start a successful business in a narrow niche than it is to compete with companies ten times bigger than you.

Still, you wouldn’t be the only one that’s tried …Gowalla, a social media startup that worked tirelessly to find its footing in 2007, failed fast as it desperately competed with Facebook, which eventually bought Gowalla for $3 million, $5 million less than the company had raised in venture capital.

In this light, Kenny Kline, the co-founder of a thriving startup, Jakk Media, shared with me his agreement with this notion of a narrow niche: “I’ve become convinced,” he said by phone, “that targeting niche audiences is a sound business strategy.”

3. You’re not actively shifting to meet market demands.

Perhaps one of the most important lessons regarding entrepreneurship was described by Eric Ries in The Lean Startup: “The only way to win is to learn faster than anyone else,” Ries wrote.

In fact, the moment that you stop learning correlates closely with the moment that your business starts failing. Take Blockbuster, a massive company that failed seemingly overnight. Reason being that Blockbuster didn’t shift with market demands. As Netflix and Redbox (smaller, faster-moving startups) found their footing in a market seeking convenience, Blockbuster became obsolete.

What’s worse? The company did nothing about it.

The market will shift and you will need to build a business that adapts quickly. If you don’t, you’ll survive only until a newer, better version of your business offers the market what it really wants.

Commit to survival.

It’s not easy to abandon ship when you’ve spent so much time and money building your startup, and you shouldn’t necessarily have to. First, you can try to fix your business. Build a healthier ROI, find a niche to operate in and ask, “How high?” when the market says “jump.”

Related: Your Business Has Two Options: Adapt or Die

If none of that works, though, and you find yourself stuck in a firestorm that isn’t getting any better, your efforts might be better spent building a new and different business that does work, for both you and your market.

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