So far in 2013, 85 predominantly US-focused venture capital funds have reached a final close according to Preqin’s Funds in Market, collectively raising an aggregate of $15bn in capital commitments. With 194 similar strategy vehicles in market currently targeting an aggregate $20bn, the figures for 2013 has sure potential to surpass or at least match the US venture capital fundraising levels seen in the previous two years. In the whole of 2011, 84 predominantly US-focused venture capital funds reached a final close, raising a total $15bn, and by the year end of 2012, 101 funds reached a final close, collectively garnering just under $20bn in capital.
Breaking the funds down by type, venture funds with no particular investment stage focus have remained the most prominent type of venture fund over the last seven years, and 2013 provides no exception, with 30 funds managing to raise a collective $8bn, accounting for 53% of the total capital raised. However, expansion/late stage funds have become increasingly prevalent, with eight funds raising 14% of the total capital raised so far in 2013. This is a significant amount when compared to the capital raised by three funds closed in 2011 which accounted for just 6% of the total. Early stage funds have remained fairly consistent in terms of their share of the annual capital raised, with the proportion ranging from 26% to 36% across the previous eight years.
The average size of predominantly US-focused venture capital funds has declined from $223mn in 2011 to $211mn in 2012, and to $190mn in 2013; thus suggesting that GPs have become more conservative regarding the amount they aim to raise. This could partially be explained by the increasing time it has taken for these funds to reach a final close. The number of predominantly US-focused venture funds which managed to reach a final close within a year has fallen from 13 in 2012, to five in 2013 according to Preqin’s Fundraising Momentum product. In contrast, the number of funds which took greater than a year to complete fundraising has increased from three funds in 2011 to 12 in 2012, followed by 15 in 2013; signifying that GPs are experiencing tougher fundraising conditions, perhaps as a consequence of a more crowded and competitive market.
On the other hand, statistics suggest that the majority of venture capital funds have been able to either meet or exceed their targets. So far in 2013, 26 funds have managed to raise more capital than originally aimed for, an increase of 8% compared with 2012 and 18% when compared with 2011. The largest US-focused venture capital fund to exceed its target this year was InSight Venture Partners VIII. The fund held its final close in May 2013 on $2,570mn, 7% above its initial $2,400mn target. This venture all-stage fund pursues investments in growing software and internet technology companies solely located in the US and is managed by the New York-based Insight Venture Partners.
Preqin’s Funds in Market data reveals that although there are signs of tough fundraising conditions, fundraising still appears to be resilient, with the majority of GPs meeting or exceeding their targets and 194 predominantly US-focused venture funds currently in market, seeking to garner just under $20bn in aggregate capital commitments.