Since the 1990s, venture capital (VC) has been at the forefront of the private equity industry and today it is still a prominent player in the private equity ecosystem, with venture capitalists continuing to find and fund innovative companies. As of May 2012, there were 369 venture capital funds on the road, targeting aggregate capital commitments of $50.5bn. These figures demonstrate a 26% increase in the number of venture capital funds in market and a 20% increase in the aggregate capital targeted compared to funds on the road in May 2011. Almost 53% of the total capital sought by VC managers is for funds that invest across all financing stages, while 22% is being targeted by expansion/late-stage vehicles, and the remainder by early stage and venture debt funds.
A geographic breakdown of Preqin’s Funds in Market data shows that the North American marketplace still attracts the most attention from fund managers and investors, with the highest proportion of both funds and aggregate capital targeting the region. There has, however, been a surge in Asia and Rest of World-focused funds over recent years. Currently, 73% more venture capital vehicles in market focus their investments throughout Asia and Rest of World than within Europe, and these funds are seeking 147% more capital. The challenging fundraising environment, as seen post-2008 global financial crisis, has resulted in an overcrowded market as of May 2012, and it is expected that many vehicles will not complete a successful fundraising process, or at the very least close below their fundraising target.
For further commentary on the venture capital market, read our Spotlight report for deeper insight into VC fundraising, as well as deal execution in this industry. In our May edition, we explore why this high-risk, high-reward potential investment strategy remains a significant part of the private equity realm.