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Tech funding surging despite bubble fears: survey

[WASHINGTON] Investors poured increasing amounts of cash into startups in the third quarter, defying fears of a bubble in the tech sector, a survey showed Wednesday.

A total of 1,799 venture-backed startups around the world pulled in US$37.6 billion in funding in the quarter, the highest since 2001, according to the survey by CB Insights and KPMG.

The vast majority of the funding - 77 per cent in the quarter - went to technology startups, according to the report. The largest other segment was healthcare, including digital health startups, taking in 12 per cent.

Venture funding so far this year has hit US$98.4 billion, already eclipsing the 2014 total of US$88.7 billion and double the amount of 2013.

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But the survey did find some signs of cooling of tech investment fever.

A large share of the funds went to mega-deals of US$100 million or more, and the money flowing into early-stage or "seed" funding fell for a fifth consecutive quarter.

Ten of the deals topped US$500 million and more than 60 deals drew in excess of US$100 million, according to the survey, with large startups such as Uber and Airbnb eschewing initial public offerings.

Only 23 per cent of the funding went to early-stage deals, the lowest level in five quarters.

"Today, there are more late stage deals and fewer IPO exits than in years past," the report said. "This may be affecting the availability of cash for seed investment."

The cash flow has led to accelerating growth in the number of billion-dollar startups, which have become known as "unicorns." A total of 23 unicorns were created in the past quarter - 17 in the United States - bring the total to 58 so far this year. According to CB Insights, there are 104 unicorns worldwide with a combined valuation of US$503 billion.

The North America region drew the lion's share of venture funding in the quarter at US$20.3 billion, while Asian-based startups took in US$13.5 billion and European firms US$3.6 billion, the report showed.

Some of the big Asian investments went to Chinese transport startup Didi Kuaidi, Shanghai food delivery group and India's ecommerce firm Snapdeal. Notable startups in Europe pulling in cash in the past quarter include France's carsharing Blablacar and German food prep group Hellofresh.

By sector, Internet and mobile communications represented the bulk of venture-backed investments, accounting for 67 per cent of all deals in the quarter.

Other important sectors including financial technology startups, which drew US$3 billion in the past quarter led by online lender Social Finance, and digital health, with US$1.46 billion led by China's Guahao and US-based Zocdoc.