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July 18, 2013


Murali Apparaju

I am wondering if the issue with "capital raised by VC's increasingly falling short of capital invested into start-ups" is about true of all start-up hubs & not just Silicon-valley AND, that probably in general it’s true of all VC activity across the globe (tho' i do understand this data is of NVCA and for USA)

Out of the entities you mentioned, I see the following two as the key contributors to this skewed ratio;

1) CVC: The emerging aggression of CVCs whose enthusiasm to invest is in equal measure helped/ influenced by not having a limitation of capital to deploy AND by their necessity to shortening the product introduction cycle in face of an increasingly unproductive in-house innovation (think... a top-10 pharma major investing in start-up biotech with just one pre-clinical asset....)

2) Angel: The recent market regulatory changes indicate (JOBS et al) that the government is attempting to bring down the dependence of start-ups on the VC's - primarily by way of increasing the available angel base & encouraging HNWIs to risk their money a lot more freely than before.

Surely the above aspects do suggest why there's a scent of fear in the winds blowing through VC quarters.

I personally feel that these newer sources of capital need to establish their longevity & consistency before the start-ups can forget about serenading the VC for funds – particularly given that non-financial companies tend to be a lot more impatient with IRR cycle-times and HNWIs a lot more prone to gravitate towards less complex and shorter-term alternative investment options.

Essentially, IMHO what goes around comes around & VC as a source of start-up capital would remain a lot more relevant in the long-term


Interesting post. The fear/uncertainty is something we are observing as well as a provider of data to VC firms.

The rise of corporations is notable. Especially in the largest tech deals, corporates are now participating in nearly 4 of 10 large deals - up from 2 in 10 just a few years ago. VCs need corporates given their own funding woes. Of course, as you mention, it will be interesting to see if the corporate investors are here to stay or are fair-weather fans of venture.[1]

The # quoted about 100 active venture funds is a bit low. We've see over 450 active firms. Many are seed funds which have relatively modest AUM but micro-VC or mega-VC, they are still VCs.[2]

Great to see an LP perspective and peering behind the curtain a bit. Thanks for the brief.

[1] The rise of corporates - http://www.cbinsights.com/blog/trends/tech-corporate-venture-capital-balance-sheet

[2] Active and hyperactive VCs - http://www.cbinsights.com/blog/trends/venture-capital-firms-active

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