Q2 2020 is the least secure quarter I’ve ever covered
Hello and welcome Back to our regular morning view of private companies, public markets and the gray areas in between.
After perhaps spending more time than we should have recently tried to figure out what’s going on with the public markets, we return to the private markets this morning and focus on venture capital itself. The new data released today describes how the US-based VCs fared in the first quarter of 2020, and give us an insight into the flushing of the financial class of start-up land into the COVID-1
The short answer is that large funds have raised a lot of money, while smaller funds seem to have had a somewhat poor quarter.
It should come as no surprise that the large funds performed well in the first quarter. We saw NEA stacked $ 3.6 billion in March, and the Founders Fund raised $ 3 billion at the beginning of the quarter for its own investments, to name two examples of TechCrunch.
According to a report by Prequin and First Republic Bank, these mega-raises have had an impact on increasing the total amount of capital raised by American venture capital firms in the quarter, while the number of funds that raised $ 50 million has decreased or decreased a small number of funds raised in total. It is hard to call an increase in dry powder a decline, but the decline in smaller funds could limit start-up capital in the future.
Particularly since at least 2019 there have been warning signals that the seed volume is slowing down. Current data from the USA underline the trend. What we see in data form this morning is a summary of what we previously reported piece by piece.
Let’s look at the data to see how much reserve capital the risk classes have today.
The rich get richer
The entire report is worth reading if you have the time. Aside from the data on how much money VCs collect themselves, it contains some interesting information. For example, only 960 venture deals were closed in the U.S. in the first quarter – a pace that would make 2020 the slowest year since 2009 if it remained stable.
According to the data listed, 83 US-based venture capitalists closed a fund in the first quarter of 2020 (“held a final deal”). This was about 24% below the first quarter 2019 result of 109. However, the number of funds raised was poor, making up for it on a dollar scale. According to Preqin and First Republic Bank, the “funds that were closed raised USD 27 [billion]This equates to a substantial amount that makes up more than half of the capital raised in 2019 ($ 50) [billion]). ”