Drop in Seed Investments in Software and Tech

Overall, VC investment in software is trending well according to CB Insights as well as Pitchbook. However, one of my observations while living in SF during and after the 2016 election was an immediate drop in seed level investment right before and after the election. The data:

The CB Insights and PwC Q2 2019 MoneyTree Venture Capital Report

Source: https://www.cbinsights.com/research/report/venture-capital-q2-2019/

While nobody can say for sure what the causes are, here are some hypotheses.

  1. The “Muslim Ban” created uncertainty. Any SWOT analysis that has to add “nationality of founders” to the RISKS category changes things.
  2. The markets were “juiced” by the corporate tax cuts, but investors recognized this as a one time event. In such an event it makes more sense to double down on larger investments.
  3. Tariffs increased “risk” as well, particularly for tech.

Possible consequences of the decrease in early stage/seed investment

  1. Decrease in Innovation in the US as money flows to existing investments.
  2. Decrease in immigrant entrepreneurs.
  3. Decrease in foreign students enrolling in US Universities.

NOTE: The annotations on the graph were done by me and are not from CBI.