Micro venture capital (sub-$100mn) fundraising has grown substantially over the past decade: 205 funds closed in 2017, securing a record $6.3bn in aggregate capital, representing a 230% and 252% increase in the number of funds closed and aggregate capital raised respectively compared with 2009. Micro venture capital fundraising as of the end of Q3 2018 will likely be on par with 2017 levels, with 162 funds closed for an aggregate $4.8bn, representing 79% of the number of funds closed in 2017 and 76% of capital raised.
New York-based Rosecliff Ventures closed its second micro venture capital fund in July, Rosecliff Venture Partners II, on $75mn, achieving 150% of its initial target. The firm also recently launched its third fund in the series, Rosecliff Venture Partners III, which is targeting $250mn and will focus on US growth companies in a variety of sectors.
In terms of fundraising success, micro venture capital funds have, on average, achieved 100% or more of their target size for the past three years. The average time spent in market for micro venture capital funds reached a record low of 12 months among funds closed in 2017. Micro funds closed in 2018 YTD have spent an average of 19 months on the road, which is just above the 17-month historical average for the 2009-2017 period.
Among micro venture capital funds, early-stage strategies (including seed) account for the largest proportion (61%) of micro venture capital funds in market, and the largest proportion (58%) of capital targeted (Fig. 20). Funds focusing on regions outside the US are targeting $2.3bn; nearly half of these funds are targeting investment opportunities in Asia.
Moreover, seven of the top performing micro venture capital funds of vintages 2007-2015 are early-stage vehicles, led by Vertical Venture Partners Fund I with a net IRR of 151.9%. The 2014 start-up vehicle dedicates 20% of its capital to the wholly owned Triton Technology Fund, which focuses on commercializing innovations coming out of UC San Diego within the software, communications and medical devices sectors.
Follow this link to read the rest of Preqin and First Republic Update: Venture Capital in the US, Q3 2018, featuring venture capital funds currently in market, notable deals and exits and much more.