We recently attended presentation by Bobby Franklin from the National Venture Capital Association. He shared some wonderful data with the following take-away: there is A LOT of venture capital out there so look for deal sizes and valuations to increase.
The slide below shows the amount of venture raised from 2006 to 2016. As you can see, fundraising reached a 10 year high at $42bln in 2016. Not reflected in the chart are that the median fund size grew to $75mm in 2016 from $40mm in 2015 (highest since 2008) and 7 firms raised $1bln+ funds accounting for 23% of the $42bln. Now is a great time to be an entrepreneur raising capital from these funds, although note that given the bigger fund sizes, VC are going to be looking to deploy more money per deal (for instance, it may be easier to raise $5mm than $1mm).
The chart below shows the amount of capital deployed into startups from 2006 to 2016. The trend is up and to the right, and even though 2016 was a slight dip from 2015 ($69bln deployed versus $79bln), expect the number to increase in 2017 given all the new capital that has been raised by venture funds. Not reflected in the chart are that deals that were $5mm or less compromised 66% of deals, software accounted for 48% of VC investment, and the deal count actually declined for the 6th straight quarter – driven largely by a decline in angel and seed deals.
So where did this capital go? The table below shows the busiest states in the nation for VC.
California is of course ranked #1 with $38bln deployed while New York came in at a distant second with $7bln deployed. Massachusetts and Texas were #3 and #4 respectively. In conclusion, now is a great time to be an entrepreneur. VC coffers are full and deployment last year was lower than in 2015, so look for increased activity in 2017 which means larger deal sizes at higher valuations.
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