Source: PitchBook
Venture capital (VC) deals steal most of the media attention, but in VC circles much of the recent discussion about the industry has centered on the topic of fundraising. Everyone knows that capital is the lifeblood of startups, but it also plays a similarly crucial role for VC funds. Unlike their counterparts on the private equity side, VCs do not typically take out large amounts of debt to fund their deals, so virtually every dollar of capital invested in their portfolio companies comes straight from their fund. To that end, having a reserve of capital to deploy is essential. This is why many people are worried that for the fourth consecutive year VC firms have invested more capital than they have raised.
Looking at the VC capital overhang, there is $63.5 billion of dry powder currently available to VC firms. Considering that VC investment has averaged $26.6 billion annually over the last four years, that means VC firms currently have less than 2.5 years’ worth of capital on hand.
Another major concern has been the burgeoning size of VC funds, as the average fund size nearly doubled from 2009 to 2011. Larger fund sizes may seem like a positive trend on the surface, but it is actually a result of a massive consolidation of capital with a few of the premier managers of the last decade. Furthermore, larger funds have a necessity to write larger checks, which could lead to a shortage of capital for early stage investments. However, the average fund size had a meaningful 37% drop in 2012 as VC firms had more success raising funds of less than $100 million.
Additionally, there were 14 first-time funds raised in 2012—more than double the number from 2011. This report examines current U.S. fundraising trends from several angles to provide a holistic picture of the current fundraising environment. We hope the charts, graphs, and analysis provide you with better data for better decisions.
See full report here – http://pitchbook.com
About Scale Finance
Scale Finance LLC (www.scalefinance.com) provides contract CFO services, Controller solutions, and support in raising capital, or executing M&A transactions, to entrepreneurial companies. The firm specializes in cost-effective financial reporting, budgeting & forecasting, implementing controls, complex modeling, business valuations, and other financial management, and provides strategic help for companies raising growth capital or considering M&A/recapitalization opportunities. Most of the firm’s clients are growing technology, healthcare, business services, consumer, and industrial companies at various stages of development from start-up to tens of millions in annual revenue. Scale Finance LLC has offices throughout the southeast including Charlotte, Raleigh/Durham, Greensboro, Wilmington, Washington D.C. and South Florida with a team of more than 30 professionals serving more than 100 companies throughout the region.
