Quick reads

There has been a growing trend in the past 5 years that shows tendencies to favor fundraising early-stage companies than ones that are more mature and have gone beyond the Series D fundraising process. 2016 shows that 73% of all deals that raised some form of capital were early-stage deals (seed, Series A), a figure up 2% from 2015. Later-stage deals (Series D or higher) accounted for just 6% of deals in 2016, only slightly down from 7% the previous year.

Companies looking for funding by Series B or Series C fundraises saw negligible change between the first half of 2015 and 2016 and has remained consistent for the past three years. The increasing inclination is that more and more early-stage ventures are getting funded while late-stage companies struggle to raise additional capital, part of which can be attributed to a “race to the top” strategy.

More specifically, the most successful start-ups are able to dominate a particular market niche and garner the most value, for example Uber in ride sharing and Snapchat in anonymous messaging. The other players within these spaces don’t garner nearly as much value as the lead company, having to forfeit 20-50x the value as the top dog simply because the space becomes overcrowded. Investors tend to favor one company to dominate a space, and once order is established, it’s becomes difficult for existing startups in the space to shakeup the market. As a result, investors more frequently than ever, are trying to put big money in early-stage companies playing in less-established markets with hopes to have shares in a company that will eventually claim a new market. Unfortunately, later-stage companies aren’t viewed with the same upside and investors shy away from them.

In the next article in this series, we analyze fundraising trends in digital health by sub-categories  – http://www.wefundhealth.com/news/digital-health-funding-by-subcategory/

Image Source: http://www.iamwire.com/how-to-scale-up-startup

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