With the summer doldrums in full swing and most of this year’s mega-IPOs behind us, investors now have the time to take stock and ask an important question: will the private growth train keep steaming ahead? That is to say, will venture capitalists accept the tracks that propelled this expansion as the end of the line, or will they continue to deploy capital to drive the innovation and disruption engine even further? While we can’t tell the future, what we can say is that one hundred different venture funds each with over $100 million have been raised in 2019, according to PitchBook. Collectively, these funds represent over $33 billion in investable capital.
VCs in the United States took the lion’s share of new capital so far this year. This observation aligns with the “best house on the block” narrative being played out in public markets and — more importantly — signals that investors expect the U.S. to remain the epicenter of global innovation, especially considering that VC fund commitments last about ten years.
A handful of venture capitalists are leading the pack. Of the 92 VCs we examined, the top fifteen accounted for about half of the total funds raised this year, with each having gathered at least $500 million in funds of the 2019 vintage. This relative concentration is telling: the limited partners and family offices that provide capital for these funds seem to be choosing “winners,” or at least those VCs with a superior track record. Accel raised the most funds by count, while TCV raised the most by dollar amount. Of the three Accel funds, two are based in the U.S. while the other is based in the UK; PitchBook claims the two U.S. Accel funds have already made ten investments. The $3 billion-plus TCV X fund will back private growth companies and seek significant positions.
Despite these large amounts raised, much of the capital has yet to be invested. Of those funds with deployment stats, over 92 percent of the capital on average remains as dry powder. When looking at those same funds collectively, only 5 percent of their capital has been deployed. If other funds without deployment statistics are acting in similar fashion, then roughly $31.3 billion of the $33 billion available has yet to be invested. Whether the investment pace will pick up over the remainder of the year or not, the funds available show a healthy pipeline of capital for private companies.
Another interesting facet to consider is that these one hundred funds will be fully eclipsed by SoftBank’s upcoming Vision Fund 2. This sequel fund has reportedly garnered over $100 billion in investor commitments, but has yet to officially close. Still, the money raised by other, more traditional VCs ought to benefit private U.S. companies as they seek capital for growth and disruption. We will continue to monitor the supply of capital available, and the corresponding effects it may have on Silicon Valley darlings and private growth companies moving forward.
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