Winter is still coming to early stage venture

Dow Jones VentureSource just released their Q4 report on venture capital. Part of the report highlights VC funds deployed and VC funds raised each quarter.  The raw quarterly data is below. 

 

 

To us there is a major trend that sticks out: VC funds are not coming close to re-filling their coffers.  Since Q3 2014 VC have deployed $238bln but over that same time have only raised $135bln.  Unless the trend reverses, that means the amount of capital available for new venture deals 2 to 5 years out will be substantially lower.  The data presented annually on a last twelve months basis is below.

 

 

While corporate strategic investors and large non-venture institutions like Fidelity can help make up any shortfall in later stage deals, they generally don’t invest in early stage deals.  Crowdfunding can help fill the gap at the early stage, but that’s likely no more than $1bln to $2bln annually.  If the difference between US VC funds raised and US VC funds deployed doesn’t shrink soon, the early stage could be looking at a vastly tighter funding environment.       

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