With the recent collapse of two US banks, a third being propped up and the financial troubles of Credit Suisse, it’s understandable to be worried if you are a startup looking for investment. Using Bright Data’s Crunchbase database, we’ll dig into the history of the average funding amount and the average number of rounds per company. Then we’ll dig deeper and investigate the industries that are investing the most and highlight where there are potential opportunities to target.
SVB’s (Silicon Valley Bank) collapse was the biggest to hit the news in March. It was known as the bank for startups and venture capitalists, described by the Financial Times as “pioneer and linchpin of venture debt market, a key alternative source of funding”. Based in the US, they also had an arm in the UK, but not a large presence in Europe overall. According to Silicon Canals, SVB served half of all venture-backed companies in the US, that is no small number of startups that will be impacted by this event.
In the same article, Silicon Canals states “The collapse of SVB comes at a time when European startups are struggling to attract early-stage funding, which puts them on the backfoot against their US counterparts.” We’ll explore this further when we detail our analysis on the Crunchbase dataset and report if this reflects their statement.
The difference with SVB was that they were geared towards startups, and had plans to invest further in Europe. With them now gone, who is going to fill the gap?
If the gap wasn’t big enough, it could get bigger with the troubles in Europe with Credit Suisse. Its stock crashed as much as 30%, and according to CNN Business, this matters because Credit Suisse “is one of the biggest financial institutions in the world. It is categorized by the Financial Stability Board, an international body that monitors the financial system, as a “global systemically important bank,” along with just 30 others, including JPMorgan Chase, Bank of America and the Bank of China.”
This is a bigger issue than SVB in the US because Credit Suisse has many more connections across the globe. They have different issues, however it’s having an impact across the financial industry. Could this mean it will be harder for startups to secure funding? Most likely. But if we look into the Crunchbase data, what can we see?
We started by looking globally at which industries are investing. The first thing we noticed when we started looking at the data was a number of industries that could be grouped together. This image highlights where we have grouped a few categories as Finance at a higher level. The detail is still available for in-depth analysis, but this grouping (or normalization as we like to call it) gives a better overall picture for the purposes of this article.
By doing this, we reduced the number of categories from 551 to 291.
The majority of the categorization in the database appeared to be related to the category of the investor, although some looked like they had been categorized as the company being invested in, so we standardized the categorization across the board to reflect the companies who were investing.
Another reason to categorize at a normalized level is because of the format of the exported Crunchbase data, one investment can show up multiple times if it is categorized against multiple industries.
This means that the investment amount is repeated, so in the example above the total investment is $5m, not $15. To avoid double counting we can aggregate the Funds Raised ID column, show the unique value of the investment, yet still keep the individual Industries as a list.
In some instances, there’s a broad range of industries assigned to the same investment. This is a great example of where if you don’t state clearly how to input the information, it can be open to interpretation to the person inputting the data, causing it to be inaccurate, which leads to difficulty in reporting.
As a side note, this highlights the importance of categorizing correctly, for any data set. We’re all for detail here at TCG, but if you have too many options, make the categories too similar or too vague, you could end up miscategorizing or being miscategorized. And you could be making the wrong business decisions based on this information.
Here’s a great example of this, Adult as a category without any context could mean many things.
But back to the data… who’s investing??
Across all years and by looking at the data by industry, it’s clear that finance leads the way. Over a period of 10 years this has increased consistently, with a more than double increase in 2022 from 2021. This includes all cryptocurrencies, which might explain some of the increase. But could this also suggest a move from financial institutions from more traditional investment?
We can see the impact this will have in 2023 following the collapse of SVB. According to The Information their Venture Unit alone was worth $9.5 billion. While we couldn’t find an exact value for Credit Suisse, Unicorn Nest reported that they have 161 investments with an average round size of $219m and 0.96 rounds per year. They also report on the same website that SVB had a total of 853 investments, averaging $29 million with 21.32 rounds per year.
So that’s a loss of around $800 million plus change for 2023, not including the knock-on effect the collapse of these banks could have on the rest of the financial industry and their appetite to invest.
Finance
All Industries
Finance aside, we can see investment opportunities in E-Commerce, Health Care, Telecoms and Social Media, many of which barely had a presence, or even existed in 2013.
Social Media
E-Commerce
But what about specific companies, who are the big investors? Again, as we set out to analyse the data, we came across another problem – multiple versions of the same company listed.
In order to report accurately, we also had to normalize these names. And what did we find? Surprisingly (to us anyway) not any companies from the financial sector in the biggest company investors.
How could this be?? Well, the simple answer is it depends on number of companies in the industry, how much they invest, how frequently, and how much. This data shows Netflix made 3 investments, while the Finance Sector had a total of 5661 investments. There are far more companies in Finance than Entertainment which is why both lists look very different.
And what about regions? Where is the investment going? By comparing North America (NA) and Europe (EU), we can see that Europe only receives around 25% of the investment of that in North America. And it’s going to get harder to source as everyone tightens their belts. We believe this confers with the article from Silicon Canals that was previously mentioned, Europe is well and truly on the backfoot when it comes to investment.
So, what can startups do to attract investment in this competitive arena? Having a good, or even great idea will not be enough, you’re going to need data to back up your investment story. As you’ve seen from this article, incorrect misleading data can appear anywhere, so make sure your financials, the chart of accounts, the sales figures and beyond are not only accurate, but telling a compelling story that will mean your business is selected above others. Regardless of company, stature or industry, we think that data wins the day and take you further than you can go alone. This is where Bright Data comes in. Bright data offers a rich marketplace of pre-collected and accurate datasets you can trust.
