Technology-led innovation is an increasingly important aspect of the global economy, driven by demand for improved efficiency in the developed world and the need for technological infrastructure in the developing world. Staying ahead of the competition is essential, with a number of large technology-oriented companies rolling out venture capital arms and incubators in the hope of capturing the next big product or service. Google, Salesforce and Intel all had an active 2014 investing in the technology space, challenging the traditional venture capital firms for deals. This blog will focus on the growth of technology-focused fundraising as a whole, a sector dominated by North America-based firms and venture capital fund managers.
Preqin’s Funds in Market online service shows that technology-focused fundraising has increased year-on-year from 2011, with funds closed in 2014 collecting $48bn. Asia-focused technology funds raised over twice as much capital in 2014 than in the previous year, easily eclipsing the European fundraising total, as seen in the chart above. This growth in Asia-focused fundraising could well continue into 2015, with countries such as India developing increasingly recognizable technology sectors that require financial support.
The average fund size for technology-focused fundraising was static in 2014 when compared to 2013, remaining at $270mn. However, this still represents a large jump from the $190mn seen in 2012, suggesting that fund managers are looking to invest in the later stages of promising technology firms, in addition to the traditional seed and series A rounds. Technology-focused fundraising remains a venture capital-oriented industry. Of the 191 funds raised in 2014 focusing on technology, 154 followed a venture capital strategy, ahead of 17 growth funds.
The evolution and continued dominance of Silicon Valley in the venture capital universe had a large part to play in North America’s $36bn in capital collected last year. So far in 2015, we have already seen one multi-billion-dollar North American technology-focused fund hold a final close, with Francisco Partners buyout fund holding a final close with commitments totalling almost $2.9bn. This strong fundraising looks certain to continue; there are currently 346 funds in market globally looking to invest primarily in technology, targeting a total of $52bn; 200 of these vehicles are focusing mainly on North American investments.