VCs invested $8.0 billion more than they raised from LPs in 1H 2013, continuing a trend that began in 2008. Both VC investment and fundraising hit an apex in 2007, but the subsequent downturn in fundraising was much more pronounced. If the current pace continues, 2013 will mark the sixth consecutive year this has happened. Over this period, the amount of dry powder available to VC firms has declined 37%. This will reach a breaking point sooner or later, and VCs will either have to curtail their investing or redouble their fundraising efforts.
It will likely be difficult to convince LPs to commit more capital to the asset class with the performance over the last decade. But returns have improved over the last several years, as VCs have become savvier and are beginning to hone their areas of expertise and expand the suite of services offered by their firms in order to nurture portfolio companies. In addition, there are several emerging themes that are proving to be intriguing to investors, such as Big Data, cloud computing and genomics.