Growing share of VC funding to North America

In recent years, the dominant trend in financing global companies has been the relocation of more capital to technology centers outside the United States, particularly to China.

However, data from the last two quarters show that the trend is changing course. During the first two quarters of 2019, according to the Crunchbase projections, North American startups * achieved 49 percent of global risk investments worldwide, well above the totals for 2018.

It is a particularly strong increase compared to the quarterly totals of the previous year. In the second quarter of 2018, new US and Canadian companies acquired only 37 percent of the global investment. In the first quarter of 2018, the figure was only a few points higher. We present the details of the last nine quarters in the table below:

China's slowdown is the main cause

When we see someone win the lead in a race, this is usually one of two things. Either the new leader has gained strength or the rivals have declined. In this case, it seems that a slow competitor is a key factor in North America's growing participation in global risk financing.

First, let's keep in mind that the total amount that went to American startups.  And Canada has been fairly stable. For the second quarter of 2019, Crunchbase projects that US companies raised $ 34 billion in all investment phases. This has gradually decreased since the first quarter and slightly more since the level of the previous year. Then it continues at historically high levels, but the rocket does not seem to be accelerating.

Meanwhile, the Chinese startups are experiencing a dramatic slowdown. Of the tens of billions of VC dollars invested worldwide in the second quarter of 2019, Chinese new companies accounted for around 15 percent of the total. That has dropped considerably since the last quarter and is a fraction of what it was in the second quarter of last year.

China's participation in the world's super-rounds (risk rounds of $ 100 million or more) has also fallen from its world-leading position in 2016 to third place in 2019. Meanwhile, the US is . It has expanded its leadership in rounds of super giant funding, even as more national startups leave the private fundraising cycle through massive IPOs.

The United States is also participating in the new creation of unicorns. Of the approximately 50 startups that became new unicorns in the first five months of the year, 35 are Americans. That is more than two-thirds of the world total.

North American round with shared sinks

Interestingly, while North America attracts more and more capital, that money goes to an increasingly smaller part of the new companies.

In the second quarter of 2019, American and Canadian companies accounted for 39 percent of the initial and risk financing rounds, according to the Crunchbase projections. That is the smallest participation in two years and far below the level of 50 percent that was achieved two years ago in the same quarter.

It is a fairly consistent trend. We have seen a round or decreasing counting share for North America in the last nine quarters, except in the table below:

Although there is no cause for the decrease in the number of rounds, one of the most important factors is the growing size of the average agreement. Risk and growth investors support fewer startups and invest more money in what they do.

The growth and maturing of start-up ecosystems in Southeast Asia, Europe and elsewhere has also contributed. More angel investors and venture capitalists investigating more new regional companies are leading to more of these companies being funded.

Lessons from China

So is it optimistic for North America that its startup environment seems optimistic? Or is the picture bearish than it seems, given the slowdown in the VC in China and the relatively bubbling readings in North America that seem more rigid compared to those in China?

The general conclusion from the recent data seems to be that it is not wise to become obsessed with a particular story.

In VC, for example, the story that has prevailed in recent years is fairly simple. Venture capital, an overwhelming American industry for a long time, globalized quickly. The general expectation was that North American startups would see a declining share in the total financing cake as the startup ecosystems grew in China, Southeast Asia, Europe and elsewhere.

Now that story has changed and North America has regained its leadership. We will see how long that takes.