We are big fans of Tomasz Tunguz’s blog (www.tomtunguz.com) and highly suggest you add it to your required reading list. He just published this post—The Three Most Important Trends in the Seed Fund Raising Market—that looks at data showing an increase in funds under $200 million raised by institutional VCs. Based on the data, he finds an increase in capital being invested by LPs into these funds, growth in fund sizes and an increase in % of VC fundraising; he then draws a line between those trends and the active seed market for the last couple of years. We noticed a few things that made us want to contribute to the conversation.
The data: Shai Goldman has put together a solid list, but research is our secret sauce at PitchBook. We, in fact, have a dedicated research team made up of over a dozen analysts and a number of auto-gathering tools dedicated to gathering and validating private market fund data. So we wanted to see how the trends Tomasz came up with held against our more exhaustive data.
Opportunity for additional analysis: With our combination of deal and fund data, we thought it would be interesting to see if we could find additional data to back up or disprove some of the conclusions.
Here is an overview of our numbers on institutional VC funds under $200 million globally since Jan. 1, 2005. We found it interesting that most of the funds raised under $200M are actually under $100M, but due to the bigger fund size, more capital actually comes from the funds $100M to $200M. Institutional VCs are defined as independent general partners who primarily make investments from funds raised from outside institutional and high net-worth limited partners.
Here is a look at the total capital raised by these funds globally since Jan. 1, 2005:
Total capital raised by sub $200 million VC funds globally since 1/1/2005
Here is a look at just U.S. funds since Jan. 1, 2005:
Total capital raised by sub $200 million U.S. based VC funds since 1/1/2005
The longer timeline actually shows a slow and steady decline in capital globally raised by sub $200 million funds. In the U.S., however, we see a very a mixed picture that ends with a very strong 2013 and what is shaping to be a strong 2014. It is also worth noting that a sub $200 million fund in 2007 was likely investing differently than one today, so we don’t feel this data disagrees with Tomasz’s belief that there are more institutional-backed investors actively making seed investments today.
In fact, the number of venture capital firms (excluding corporate VCs, angels, accelerators, etc.) that are making seed investments has been increasing. Below is a chart showing how many VC firms made a seed investment during each year since 2005.
Number of venture capital firms making at least one seed investment by year.
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