Venture capital funding for startups drop

While, we might see a rise in a number of startups every day. There is an equal number of them shutting down on a daily basis. We heard about Lady Gaga's startup Backplane crashing and now Uber for kids startup "Shuddle" has shut down.

The list of start-ups who have laid people off or shut down in recent months is really long.  While, startups are facing a lot of issues, one major problem on the rise is funding. Shuddle was failing to raise more venture capital and hence announced plans to shut on Thursday.

Shuddle announced it via an email sent to drivers, that said that the company worked hard to find the financial resources, but couldn't raise the money in the end.

A similar fate was met with on-demand food-delivery service DoorDash Inc.  They were looking for huge funding but were forced to sell its shares in February at a 16% discount to its price last March.

Despite the fact that, investors have been hailing over the success of ride-hailing service Uber Technologies Inc., funding just about any venture of theirs. The fate of Shuddle has definitely raised serious questions about the current environment for funding.

It is highly alarming to see that not a single venture-backed tech company went public in the first quarter, and this has happened for the first time in the past seven years.

If we talk about numbers, a total of $13.9 billion flowed into U.S. startups in the first quarter, and only 884 deals were done, the lowest number in four years. As per latest data from Dow Jones VentureSource, venture capital funding for startups dropped 25% in the first quarter of 2016, the biggest decline since the early 2000s. On the other hand, funding for information technology—companies that develop computer hardware, networking and software—fared better than other sectors, rising 3% from the fourth quarter.

However, the report seems to be really focused on the traditional VC market. The startups included in it are  the ones which are venture-backed round. It goes on to ignore startups backed only by angel investors or private individuals. So, it does not take into account a very early stage startups.

A bright spot amidst the dark is the current situation of biopharmaceutical startups, which gained 7% more funding in the quarter. The report said, Biotech investors’ prospects were buoyed by the fact that the sector managed six venture-backed U.S. IPOs in the first quarter itself.  That too when the marker otherwise was highly unreceptive.