According to Preqin’s Private Equity Online, information technology (IT) has accounted for half of the overall committed capital in the North American venture capital industry from 2012-2016, and raised $18bn in 2016, a significant increase from the previous year.
Despite the uncertain political climate for the IT sector, 2016 continued the trend of increased fundraising for North America-focused IT. In 2012, 76 North America-focused IT venture capital funds targeting closed, securing $9.8bn, with just under a $2bn difference in total capital raised between the IT and healthcare sectors. By 2014, the disparity between the two industries had tripled in size, with 124 IT funds raising $14.3bn, while North America-focused healthcare venture capital funds secured just $8.2bn through a third of the number of vehicles.
As mentioned in a previous Preqin blog, funds targeting IT are predominantly focused on North America. As shown in the chart above, the industry experienced its largest jump in market share since 2012, up 16 percentage points from 2015. 102 IT-focused venture capital funds have reached a final close so far in 2016, nearly four times as many as the next leading sector.
Furthermore, IT funds targeting North America have been more successful in achieving their initial targets this year: 82% of funds closed either met or exceeded their target, surpassing the 79% of funds closed in 2015. Additionally, the two largest North America-focused venture capital funds closed this year were dedicated to IT investments; Technology Crossover Ventures IX secured $2.25bn in commitments, while Andreessen Horowitz Fund V raised $1.5bn.
While venture capitalists are uncertain of how legislation will affect the industry in the region – President-elect Trump has not yet presented a technology agenda – the largest proportion of US-based private capital managers surveyed by Preqin after the US election result did not think that the result would affect their ability to secure capital from investors. The innovative nature of the IT industry should drive further appetite from both LPs and GPs due to its potential to disrupt current industries and create new markets, enabling the prospect of high returns.