You might be forgiven for reading the first few paragraphs and feeling slightly morose; "the bad news: fewer deals, fewer IPOs, dropping valuations". It certainly does start to paint a gloomy picture. Read further, and you notice the 11% decrease in venture capital dollars being invested in The Valley, a drop of 5% in deal numbers and the slowest quarter start for IPOs since 2011.

However generally, I don't think I'm feeling quite as morose about the state of the UK's venture capital market (at least at the moment and putting aside D-day tomorrow (following which I may of course change tact...)). 2015 was undoubtedly a busy year in the world of venture capital; not just in the US and the UK, but across the world and perhaps this is distorting the stats when it comes to now analysing the state of the world, and in particularly the UK, venture capital markets. 

Whilst practising and looking back over the past five years, I noticed both an increase in the level of investment in UK companies by VCs and also M&A activity involving the sale of UK companies which had VC backing, often following on from positive valuations when it made sense to dispose of their portfolio companies. From my own experience, this hit a particular peak in 2014/15 and whilst it may have dipped, there is still a very distinct level of activity buzzing away and which is perhaps just holding its breath for tomorrow's referendum results.

With this in mind, I do wonder if the reduced activity is actually a contraction which is capable of "bursting a bubble" of if, instead, its simply momentarily stalling due to the referendum and simply as a result of the VCs experiencing relatively successful exits, recognising the opportunities presented to them over the past few years and, generally, moving many of their funds into "exit mode".

I'm certainly of the view that VCs are managing their money - and their investments and exits - much more carefully than they ever have. Performance pressure is greater than ever following 2008 and there is therefore an increased importance on VCs to not only invest at the right time and at the right price, but also take advantage of good exit opportunities when they present themselves. Whilst activity is down as a whole, the evidence indicates to me that fund managers are being more selective about the companies that they invest in, and when, and similarly when they exit their investments. If there is time to spare in a fund's life cycle (which seems to be the case for a number of funds for whom I worked) why should they not hold onto their investment until the time is right and, if necessary, provide extra funds to their portfolio companies to get them to the right level pre-exit? Certainly this seems to be what they are doing, and this is reinforced to a degree by the stats showing that later stage companies are still raising funds "at an enthusiastic pace" and that "exits through acquisitions seem to have taken the place of some IPOs".

So if venture capital is in a bubble (and I think it might be, but perhaps only at the larger end) then I do think the bubble is floating along contently at the moment. Perhaps a shining light (or, the additional "bubble-bath" if you will) is that the stats provided suggest that there is a huge amount of funds being raised in 2016, particularly in the US; i've no doubt this is also the case in the UK (and even if it's not, then given the influx of US investors to the UK over recent years, i'm inclined to think that deserving UK companies will see some of it).