The New Pace Of VC fundraising? Why Early Stage VCs Are Fundraising Faster Than Ever by Winter Mead, Pitch Book
The following is a post written by Winter Mead, a senior associate at Sapphire Ventures. You can find Winter on Twitter at @wintmead.
Many would agree that company financing dynamics in venture capital have changed in recent years, especially with respect to valuations rising, round sizes increasing and companies staying private for longer. From my vantage point, these dynamics are contributing to an accelerating pace of VC fundraising. The story told below using PitchBook data explains partly why early stage VCs have been coming back to fundraise faster and why this trend may persist if financing dynamics continue at their current pace.
What is the state of U.S. VC fundraising today? Many more venture funds are raising capital now than in recent history. The current pace in 2015 is expected to surpass 2014 in both total capital raised and number of funds closed.
Clint Carlson's Double Black Diamond Fund returned 3.94% for April, bringing its year-to-date return to 5.27%. All of the fund's business units were in the green for April except its event-driven strategy, which declined nine basis points. Year to date, all units except for the event-driven strategy are in the green, with the event-driven book Read More
So what are some of the dynamics causing this accelerating pace of VC fundraising? First, as everyone knows, valuations are up, which equates into round (or deal) sizes being up, too. With bigger round sizes, VCs are required to write larger checks to maintain their ownership targets. Larger checks deployed per round also means that capital is deployed faster on a per company basis than it has been historically for the same strategy.
Following is a deeper dive of the chart directly above: round sizes have increased in angel/seed deals, so, as mentioned above, angels and seed funds are putting greater amounts of capital in initial financing rounds.
Full article here Pitch Book