American buyout shops have increasingly been investing in VC rounds, according to PitchBook data. Since the beginning of 2009, 584 U.S.-based PE firms have participated in at least one venture investment, with 28 involved in at least 10 financings. And these investments haven’t simply involved smaller crossover-type firms, either. In the past six months, KKR has led the way with seven investments in VC rounds—including a leading role in FanDuel’s $275 million Series E financing last month—while Silver Lake and Warburg Pincus are not far behind. The number of venture rounds with participation from U.S. PE firms hit a high of 325 last year, totaling $9.3 billion in aggregate (up 18% and a staggering 87% YoY, respectively); 2015 so far has had 181 such deals worth a whopping $7.1 billion combined.
As seen in the chart below, the median post-valuation generated in rounds with U.S. PE participation (generally in the late stage, of course) has climbed to about $134 million so far this year, up roughly $66 million from 2014:
With venture round amounts skyrocketing (there have been more than 250 deals worldwide of $100 million+ since the beginning of 2014), larger and larger funds are needed to finance each investment. As a result, significant participation in a mega-round is a high-risk prospect for many VCs. PE firms, though it may be a stray from their typical strategy, have the capital to fund these enormous rounds and have undoubtedly been intrigued by continually rising VC valuations amid what is often a losing battle with cash-heavy strategics.
U.S. PE firms participated in $9.3 billion worth of VC rounds last year, up 87% YoY. Tweet this!