Funding for ‘on-demand’ start-ups wanes
Venture capitalists put off investing due to growing criticism of the business model
Funding for ‘on-demand’ start-ups is slowing down, according to a new report by Goldman Sachs.
The sector raised $87bn (£66bn, €78.5bn) of private investment from 2014 to 2018, the report said. However, venture capitalists have been put off investing in the gig economy, due to growing criticism of the business model.
Funding declined 6 per cent year on year in the third quarter, to roughly $55bn globally. The biggest decline was in China, which saw a 36 per cent drop in funding, while the US and Asia declined by 7 per cent and 23 per cent, respectively.
Only Europe witnessed funding growth, with a 51 per cent year-on-year increase.
The drop mainly affected “services with internet convenience advantages” which primarily includes ride-hailing and food delivery.
Venture capitalists said these companies may have to raise prices and cut expenses as funding dwindles.
According to analysts at Goldman Sachs there is rapid growth in enterprise-facing applications, such as self-driving cars and human resources technology.
Machine vision venture funding has also grown at a 60 per cent for the past 5 years, as manufacturing applications have multiplied.
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