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North America-Focused Venture Capital Funds: Early Stage Prominence – June 2014

by Courtney Higgins

  • 13 Jun 2014
  • PE
  • VC

According to Preqin’s Funds in Market online service, 48 North America-focused venture capital funds have reached final close in 2014 so far, raising an aggregate $9.5bn. These figures indicate that 2014 is well on its way to match 2013’s fundraising statistics of 139 funds closed with an aggregate amount of $21bn raised. Additionally, this figure signifies a slight increase from 2012 when 125 North America-focused venture capital funds closed, raising a total of $21.8bn. Since 2011, fundraising figures show a steady increase in North America-focused venture capital fundraising from the post-crisis lows in 2009, whereby 103 such funds closed raising an aggregate $15bn. 

Significantly, of these North America-focused venture capital funds closed in 2014 YTD, 56% have been early stage funds, continuing the trend seen in 2012 and 2013 whereby early stage funds made up the majority of all North America-focused venture capital funds (57% and 54% respectively). In years prior to this, early stage investments had consistently represented less than 50% of all North America-focused venture capital funds. Preqin’s statistics show that there are currently 294 North America-focused venture capital funds in market collectively seeking $34bn. Funds focused on early stage investments make up 51% of North America-focused venture capital funds in market, compared to 9% targeting expansion/late stage investments and 39% across all venture stages. 

One of the most notable North America-focused venture capital funds to have closed in 2014 YTD is targeting early stage investments. Founders Fund V, managed by The Founders Fund Management, targets multiple industries including technology, communications, biotechnology, aerospace, and healthcare IT within the US. Founders Fund V held its final close in March 2014 at $1bn, exceeding its original target of $750mn. In addition, the largest fund currently in market in relation to fundraising target is an early stage fund: Invention Investment Fund III, managed by Intellectual Ventures. The vehicle is aiming to garner $3bn and focuses on early stage investments in a diverse range of industries with an emphasis on innovation. 

Venture capital fundraising in North America has slowly begun to emerge from the lows experienced during the financial crisis, which heavily impacted all asset classes. In particular, it has witnessed an emergence of early stage funds which looks set to be sustained given indicators seen in the current fundraising market. With fundraising remaining at an above 50% proportion towards early stage funds, and large scale exits of venture capital-backed companies such as WhatsApp and Uber Technologies, early stage investing looks set to continue its prominence in the North America venture capital sector.

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