Venture capital fundraising has continued apace, but much less cash is being deployed.
Let’s start with a few titles:
- Bessemer raised about $3.85 billion in early-stage startups in September, the biggest vehicle in the company’s 50-year history.
- Insight Partners raised over $20.0 billion in February, double its predecessor (closed April 2020 at $9.5 billion).
- Lightspeed raised more than $7 billion across four funds for Series B rounds in July.
- Battery Ventures in July raised over $3.8 billion with a broad mandate.
- Founders Fund in March raised more than $5 billion in venture ($1.9 billion) and growth ($3.4 billion) funds.
- a16z raised approximately $4.5 billion in its fourth blockchain-focused fund in May, bringing its total funds raised for blockchain-related businesses to over $7.6 billion.
- a16z separately closed $9 billion in fresh capital in January, including $1.5 billion allocated to biotechnology investments.
- Tiger Global is rumored to raise PIIP 16 in what could be an estimated $10 billion vehicle and its second largest fund ever.
Public markets have seen an extreme recalibration of valuations, and this is effectively trickling down to private markets. All the while, cross-funds and venture capitalists have been watching from the sidelines – capital deployment is kind of in “wait and see” mode.
The Net/Net: More dollars raised with fewer deployed equals significantly higher cash balances.
What the numbers tell us
Venture capital fundraising has remained relatively constant this year. Venture capital firms have raised a total of $122 billion so far this year and are on course to end the year with $172 billion.
Short-term assessment “workarounds” can become much bigger issues in the long term.
This is 20% less than in 2021 ($214 billion), slightly below 2020 ($180 billion) and around 11% less than the average of $194 billion collected each year since 2019.
This strong level of fundraising contrasts sharply with the poor performance of high-growth names on the public markets. For example, our high-growth SaaS compartment suffered losses of around 60% to 80% or more.
The total capital deployed by venture capitalists in Q2 2022 and Q3 2022 has declined rapidly and now averages just $39 billion per quarter. It’s on track to be the lowest reading since we can pull data from 2017.
Currently, capital deployed in Q3 2022 (less than $40 billion) is expected to be around 70% lower than Q4 2021 levels (around $118 billion).