Dollars made from mobile startup exits — that is, acquisitions and IPOs — have dropped below the number of dollars earned from venture capital investments (per quarter) for the first time since 2013, says a new report from Digi-Capital.
The firm says that during the past 12 months investors put a record $50 billion into mobile startups.
Meanwhile, as Digi-Capital says in its quarterly mobile Internet report, returns from exits fell steadily to half of last year’s peak level. “So even before the current market troubles, there was already a huge pile of locked up cash waiting for an exit,” the firm said in an email to VentureBeat.
In early stage markets, more money is generally invested than comes back to investors, the report says. Exits began to heat up in 2012, with investors seeing more than three and a half times the money invested coming back as returns by the end of 2013.
The first half of 2014 saw an almost 3X ratio. Then something happened.
Digi-Capital says returns from exits fell below the amount of investments in Q2 2015. (This, however, excludes the outlier Facebook/WhatsApp deal, Digi-Capital says.) In other words, less money came back to mobile investors than went in during the last quarter.
“The mobile internet exit (M&A + IPO) market stayed in the low single digit billions of dollars per quarter from 2011 to mid-2013,” wrote Digi-Capital managing director Tim Merel in a blog post. “It took off in the second half of 2013, cresting at just over $25 billion by the middle of last year.”
He continued: “But then the market began to turn. Mobile IPOs started to dry up. While mobile M&A continued to grow until Q1 2015, it dropped dramatically in Q2 towards 2013 levels. Combined exits have now fallen steadily (excluding Facebook/WhatsApp) for 2 straight quarters, and are half what they were at their peak.”