Photographer: Victor J. Blue/Bloomberg

The Startups Economy Is Finally Stabilizing

An index tracking the health of U.S. startups rose for the first time since 2015 this week.

After a prolonged retrenchment, startups in the U.S. are finally seeing better days.

The Bloomberg U.S. Startups Barometer rose 0.6 percent from a year earlier, marking the first year-over-year increase since the end of 2015. Bigger funding totals and more exits buoyed the index.

Source: Bloomberg. To see an interactive version of this chart, as well as the components that comprise the headline index, click anywhere inside the image.

Snap Inc. and MuleSoft Inc. are among the companies that went public in recent weeks. Initial public offerings give investors a chance to cash out and reinvest their money into younger businesses, making them a leading indicator of the funding environment for startups.  

"We think there will be anywhere from 30 to 35 venture-backed IPOs this year," said Scott Raney, a partner at Redpoint Ventures, which manages $4 billion of investments. "By all measures, it feels like it'll be a much better year."

Companies choosing to remain private have also helped the index. Rising deal sizes have been driven by mega financing rounds, including $1 billion raised by Airbnb Inc. and $300 million raised by WeWork Cos.

Raney highlighted the growing tendency for startups to raise large amounts of money at late stages of their lifecycle. "That's a really interesting phenomenon, and representative of the fact that these companies are swinging for the fences the way we've never swung for the fences before in venture capital."

That may be contributing to still-tough conditions for less-proven businesses. Two components of the Bloomberg U.S. Startups Barometer—the number of deals, and the number of companies that raise money for the first time—have still continued to decline from a year earlier.  

Check back in every Monday for a new weekly reading of the Bloomberg U.S. Startups Barometer. The index tracks the business conditions for venture capital-backed private technology companies that are based in the U.S., and excludes biotech businesses.

—With assistance from Sarah McBride. 

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