Venture capital investment may have slowed down considerably in the current economic climate, but the number of new funds focused on bankrolling early-stage startups appears to be growing. The trend toward smaller vehicles with a tighter focus, exhibited over the last two quarters when venture firms raised only $4.3 billion and $3.5 billion, respectively, continues right up into the present.
After poring over data from The Deal and other sources that focus on venture capital, we've concluded that in the last six weeks that about $1.2 billion has been raised by firms for dedicated venture capital investment, with another $3.3 billion for funds-of-funds that will back new venture capital (and private equity) vehicles in the future.
Firm |
Focus |
Size (mill.) |
| Trinity Ventures |
Early-stage technology |
$300 |
| BlueRun Ventures |
Early-stage technology |
240 |
| Constellation Growth Capital |
Digital media |
200 |
| StarVest Partners |
Expansion-stage technology |
200 |
| Target Partners |
Early-stage technology |
150 |
| Signal Lake Management |
Early-stage telecom & networking |
150 |
| New Atlantic Ventures |
Early-stage technology |
115 |
| Google Ventures |
Early-stage technology |
100 |
| DFJ Frontier |
Early-stage technology |
55 |
| Total |
$1,210 |
| |
| Venture Capital Fund-of-Funds |
Firm |
Focus |
Size (mil.) |
| Morgan Stanley Investment Management |
PE/VC Fund-of-funds |
$1,140 |
| Abbott Capital Management |
PE/VC Fund-of-funds |
1,000 |
| Wilshire Private Markets |
PE/VC Fund-of-funds |
615 |
| Teralys Capital Fund |
Venture capital Fund-of-Funds |
578 |
Source: The Deal.com |
Nearly all the funds closed since the start of April are early-stage vehicles. With capital hard to come by, it looks as if VCs are planning to concentrate on finding IT startups with limited capital needs rather than late-stage companies that may need significant sums to ramp up production or to weather a downturn in business until the recession is over. With the IPO market just beginning to open up -- maybe -- and M&A valuations way down, late-stage investments are an even tougher sell since a pickup in exit volume appears still to be a long way off.
It's a similar story for the venture funds in the hopper. New Enterprise Associates, which already has $2 billion in hand for its latest fund targeting early-stage companies, is expected to be the 800-pound gorilla when it reaches its $2.5 billion goal, but a host of smaller vehicles led by former entrepreneurs are also in the works. According to peHUB, Netscape co-founder Marc Andreessen and former Opsware exec Ben Horowitz are looking to raise $250 million for their early-stage fund, as is MyPoints founder Noah Doyle, whose Stage 5 Ventures is out to raise $266 million. Skype co-founders Niklas Zennström and Janus Friis are reportedly out marketing a $250 million fund, according to paidContent.
Venture capital funds currently being raised |
Firm |
Focus |
Projected Size (mill.) |
| New Enterprise Associates |
Early-stage technology |
$2500 |
| Battery Ventures |
VC/PE technology |
750 |
| Atomico Ventures |
Early-stage technology |
266 |
| Unnamed - started by Marc Andreessen and Ben Horowitz |
Early-stage technology |
250 |
| IGNIA Fund I, L.P. |
Technology - Latin America |
100 |
| Rockley Group |
Technology - China |
100 |
| Walden International |
Early-stage technology |
14 |
| Y Combinator |
Technology - Singapore |
2 |
| Stage5 Ventures |
Early-stage technology |
N/A |
Source: The Deal.com |
And it's not only entrepreneurs targeting the next generation of startups: Venture capital firms Spark Capital and Sequoia Capital each made moves toward increasing their funding, specifically for seed-stage companies, in late March. The Start@Spark program is focused on companies developing technology in the media, technology and entertainment areas, while Sequoia and angel investors Ron Conway, Paul Buchheit and Aydin Senkut are backing a $2 million Y Combinator seed-stage fund. - George White
See Deal Pipeline story on fund closing for Trinity Ventures
See Deal Pipeline story on fund closing for DFJ Frontier
See Dealscape post on Google Ventures
See Dealscape post on VC fundraising in the first quarter
See Deal Video interview with Spark's Bijan Sabet
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This is an encouraging trend, and one that I think is long overdue. It never made sense to me that capital efficiency took a back seat during the boom years, so I'm glad to see it once again getting attention.
Easy credit isn't coming back anytime soon - we had a 25-year credit boom, which doesn't correct itself in 12 months...so I'd expect lean to be cool, and leaner to be even cooler as time goes on!