Is a Startup Funding Bubble Hurting DC Tech?

If 2015 was the year of massive valuations and big funding rounds for tech startups, then 2016 was also supposed to be a down year for venture capital. During the fourth quarter of 2015, there were 15 percent fewer deals that happened between startup founders and private investors, according to CB Insights. This downward trend, among other things, was supposed to signal the beginning of a bad year for startup funding. But according to research conducted by DC Inno based upon SEC filings, individual company announcements and our own reporting, we've actually found an inconclusive mix of small and big investments going to D.C. area tech firms in 2016.

The fear that funding from investors will be harder to come by this year is a prominent rumor I have heard consistently from local startup founders around the scene.

And while the average amount of funding per month may be down from November 2015 to March 2016, the number of deals being made remains somewhat similar. In short, those worries about a funding drought may be justified—at least locally—but it remains important to know why and to what degree.

We looked at every single D.C. area tech funding deal that occurred, some of which have yet to be publicly announced, since the beginning of Q4 2015 (October) up until now (March 24).

By compiling this information into weekly posts called New Money, we've been building a database that holds information capable of answering our original question: is the VC bubble bursting?

In chart 1, you can see that the size of individual funding rounds has fluctuated greatly. Admittedly, though the data is limited the key takeaway is that a straight downward trend has yet to occur.

And chart 2, shows total funding per month since October. Overall funding is indeed down this year, but again the rebound in February is an encouraging sign.

Here are some other highlight from our reporting: