The National Venture Capital Association has just released the latest MoneyTree data on venture industry fund-raising, which always makes me sit up straight and take notice—it’s kind of an industry scorecard. In addition to being baffled by the fact that the amount the U.S. venture industry invests outstrips how much we raise (see below), I am intrigued by the other forces at work as the VC industry risks becoming more like a money management business. But first the facts…
In the last quarter of 2014, the venture industry raised nearly $5.6 billion for 75 funds, of which 27 were “first time” funds. While the number of funds raised was 14 percent higher than the third quarter of 2014, the amount of dollars raised dropped by 9 percent. (In comparison to the fourth quarter of 2013—a year ago—the number of funds increased by 17 percent while the dollars raised was effectively flat.)
For all of 2014, VCs raised $29.8 billion for 254 funds, which basically returns us to 2007 levels, when $30 billion was raised. Over the same period, however, VCs invested $48.3 billion in 4,356 deals. This “funding gap” of $18.5 billion in 2014 is unprecedented. In fact, if you lay out the data for the past 30 years (which I just did), the amounts raised vs. invested basically tracked each other up until 2002. A persistent and growing “funding gap” started to emerge about six years ago.
So either these lines converge rapidly—that is, VCs simply shut off the investment spigot (which is easier than raising materially larger funds), or there will be a more profound evolution of the early stage capital marketplace.
In an environment of basically free money and zero interest rates, limited partners are increasingly looking to
Author: Michael A. Greeley
Michael is a General Partner at Flare Capital Partners. Prior to co-founding Flare Capital Partners, Michael was the founding General Partner of Flybridge Capital Partners where he led the firm’s healthcare investments. Current and prior board seats include BlueTarp Financial, Circulation, EndoGastric Solutions, Explorys, Functional Neuromodulation, HealthVerity, Iora Health, MicroCHIPS, Nuvesse, PolyRemedy, Predictive Biosciences, Predilytics, T2 Biosystems, TARIS Biomedical, VidSys and Welltok.
Previously, Michael focused on emerging-growth company financings with Polaris Venture Partners, was a senior vice president and founding partner of GCC Investments, and held positions at Wasserstein Perella & Co., Morgan Stanley & Co. and Credit Suisse First Boston.
Michael currently serves as chairman of the Entrepreneurship Committee of the Massachusetts Information Collaborative and on the Investment Committee for the Partners Innovation Fund and Massachusetts Eye & Ear Infirmary. Michael also serves on the Industry Advisory Board of the Cleveland Clinic and Boston Children’s Hospital, as well as serving on several other boards including the New England Investors’ Committee of Capital Innovation. He was the former chairman of the New England Venture Capital Association and on the Executive Committee of the board of the National Venture Capital Association. Named by the Boston Globe as the “Go-To” investor for life sciences, healthcare and medical devices and a Mass High Tech All-Star, Michael earned a B.A. with honors in chemistry from Williams College and an M.B.A. from Harvard Business School.
Michael authors a blog focused on venture capital, innovation and healthcare at www.ontheflyingbridge.com.
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