The amount of venture capital funding in the U.S. fell 11 percent in 2016, according to a report released Wednesday by Crunchbase.
U.S. venture investment is projected to net out at $76 billion in 2016, and though that is a hefty sum, it is down from $86 billion a year ago, according to Crunchbase's Global Innovation Investment Report. Crunchbase is a service that provides those in tech and venture with information about startups.
This slowdown in tech, which many expected heading into 2016, was felt across the tech startup sector. Most notably, the creation of tech unicorns--meaning private startups whose valuations were north of $1 billion--fell drastically when compared with 2015. That year, the tech industry created more than 70 unicorns, but in 2016, there were only 14 new unicorns in the U.S., the Crunchbase report said. Last year also saw the fall of some existing unicorns, most notably Theranos, whose valuation crumbled amid regulatory woes and countless reports that questioned the validity of its technology.
"Due to the concerns about valuations, we saw some pullback," said Jager McConnell, CEO of Crunchbase. "We will still see unicorns, but at a reduced count."
Additionally, the number of U.S. seed-round investments also fell drastically in 2016, down 32 percent compared with 2015.
"It's open to debate whether this was a healthy dip after an overheated 2015 or something more dramatic," said McConnell.
Heading into 2017, there are some reasons for optimism. The IPO market seems to be gaining momentum, most notably with Snap having recently filed for its IPO and others like Uber in a good position to also go public. Mergers and acquisitions, meanwhile, remained steady in 2016 and continue to be a reliable exit plan for startups.
Startups from certain sectors--such as artificial intelligence, autonomous driving, and enterprise security--are in high demand and poised to receive funding. At the global level, investing went up in 2016, increasing 19 percent to $176 billion. For entrepreneurs in Europe and Asia as well as the sectors mentioned above, now is still a good a time to start a business. For others, it may not be so, McConnell said.
"In the U.S., it looks like it will be a more difficult funding environment for the classic motivated founder with a bright idea but no proven startup track record," he said.