Implosion, correction or normal?
By Simon Chadwick, managing partner of Cambiar and editor-in-chief of Research World.
In 2014, the pace of capital investment into our industry jumped 83% over the prior year. That was on top of an 88% increase in 2013. Nearly $5.8 billion poured into the industry – seven times higher than in 2011. When will this stop? The answer, it seems, is now.
Investment has returned towards ‘normal’ levels. The Cambiar Capital Funding Index (CCFI), now in its fifth year, recorded 120 transactions in 2015, down from 152 in the prior year. Comb These transactions amounted to $2.56 billion flowing in to the industry; since we believe we capture only about 80% of all such transactions, this equates to a total inflow of $3.2 billion – or some 55% of the previous year’s total.
That might seem catastrophic, but 2014’s data included some hefty IPOs and venture infusions (IMS Health, Cloudera, iSentia, Mozido and Qualtrics) which accounted for $2.7 billion in just five deals. Excluding those transactions would have brought the 2014 total down to $3.1 billion – not far off this year’s number. Three of those events were IPOs which represent the logical outcome of a series of private and venture investments over the course of three particularly successful company’s lives to that point. The other two represented a “doubling down” on successful data analytics solutions, of which we saw a lot in 2014. This suggests the cycle of investment over the last half-decade was coming to a natural end as investments showing signs of success were reinforced and others departed the field.
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