×

Tech start-up funding plunged in fourth quarter

Steven Puetzer | The Image Bank | Getty Images

Venture capitalists were already talking about it, and now the numbers confirm it: Start-up investing is on the decline.

According to a report Thursday from research firm CB Insights, global funding to VC-backed companies dropped 30 percent in the fourth quarter from the prior period, to $27.3 billion, the lowest since the third quarter of 2014.

The drop-off was particularly stark at the late stage, with the number of $100 million-plus financings plunging by almost half — to 39 from 72. Only nine companies joined the billion-dollar "unicorn" club, down from 23 in each of the prior two periods.

"After an exuberant Q3'15 which hit dot com funding levels, Q4'15 cooled dramatically," the report said.

Venture investors spent much of 2015 predicting a slowdown, but it didn't materialize until the stock market's August route filtered into the private market. The combination of a weak IPO environment and poor performance from the companies that debuted led many late-stage investors to retreat because of inadequate returns.

CNBC.com reported in mid-December, based on interviews with about two-dozen tech investors, that valuations were coming down rapidly and deals were taking longer to close. That followed a survey in November that showed sentiment among venture capitalists sank in the third quarter by the most in five years.

The belt-tightening has officially begun.