The great venture-capital feeding frenzy continues unabated -- but, in recent months, the mood and motivations of the founders and investors taking part in it have shifted somewhat, with a uncertainty replacing optimism. 

U.S.-based companies raised a record $19 billion in venture financing in the third quarter of 2015, a 3 percent increase over the previous quarter and a 73 percent year-over-year jump, according to the just-released Dow Jones Venture Capital Report. But the number of funding deals, at 931, was the lowest in more than three years. (A report by CB Insights shows somewhat different numbers but the same trend.) 

What's you're seeing is a change in the nature of the deals getting done, says Jeff Grabow, Ernst & Young's venture capital leader for the Americas. With a widespread feeling in the air that the current cycle of easy access to capital is nearing its finish, founders are "moving into a realm of funding for sustainability versus funding for growth." That is, they're trying to maximize their war-chests against the possibility of an investment pullback that could last a year or two. "People are starting to believe money may not flow so regularly forever," Grabow says.

Investors, meanwhile, are focused on making sure the bets they already have down pay off, which means seeing to it their most promising and advanced portfolio companies don't falter for lack of cash during the long winter. Hence the smaller number of bigger deals for late-stage startups, paired with a diminished number of placements in earlier, more speculative ones. "They're making sure the companies that are in the pipeline have the capital they need to exit the pipeline," Grabow says. 

While seasonal rhythms are likely to push up the total number of deals in the fourth quarter somewhat, Grabow expects the pattern to continue through the end of the year. 

Published on: Oct 15, 2015