However, that shortfall is not necessarily a worrying sign since Facebook’s recent $1 billion acquisition of Instagram may fuel a flurry of new activity, according to the researcher, CB Insights.
CB Insights’s report found there were a lot of deals in Q1 — 785 investments, which was the second most in the past nine quarters. But the dollar amount of those investments was relatively low, which accounts for the drop.
“We do not think that a single quarter dip in funding is in any way symptomatic of any sort of correction or any sort of bubble bursting,” reads a statement from the firm. “Deal activity, which we view as a better gauge of investor sentiment, remains strong. The funding dip is primarily the result of fewer VC mega deals in the quarter, which as the quarter illustrates can and do move numbers significantly up when present and down wildly when absent.”
Speaking of mega deals, though, CB Insights sees Facebook/Instagram as a catalyst for more and larger investment in mobile. “We expect that the coming quarters will be interesting for the mobile sector as companies and investors try even more aggressively to ride the mobile wave,” the researcher concludes.
Although the report looked at VC activity across the board, the same phenomenon of more deals for smaller sums of cash held true for Internet-based investments as well. While Internet funding fell 17%, deal volume grew 16% with a five quarter high for seed VC deals.
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