QUARTZ have written a fantastic article called The Decade That Completely Transformed Venture Capital that describes the major VC trends, which I’ve summarised below:

  • VC Invests globally US$250bn per year with assets of $1.4trillion
  • Doubling of time to an exit over past 12 years
  • VC industry invested 4x more in 2019 than 2010, but only 2x the number of companies
  • So VC industry is providing twice the fuel to each company
  • This increase in time and valuation leads to more the gains going to the founders and private investors, over public
  • There were 800 VC firms in 2010. More than 2,000 more have been founded since.
  • FUM has grown massively because VCs have dramatically out-performed public markets over the past 25 years
  • Since 2012 VCs have returned more capital than they’ve raised
  • The “Yale model” of allocating heavily in alternatives (very successfully) with VC growing from 1% in 1985 to 21% today has produced huge attention and copy cats
  • Softbank’s $100bn Vision Fund has lead to bigger rounds and inflated valuations, and also encouraged some VCs to raise larger funds
  • VC initially invested in hardware companies, but now its dominated by much faster growing frictionless software companies, that leverage cloud and mobile networks globally
  • This offers a lot more opportunities for a lot more companies to make a lot more money than ever before
  • GPs are incentivised and thus built larger funds to earn larger fees and carry
  • The number of Seed VC funds have grown massively crowding out angels. 1,600 VC funds with less than $100m have been established in the past 10 years, from 32 new funds in 2009 to 295 new funds in 2018.
  • What was a Series A investment 10-20 years ago, is now a Seed size, similarly a Series B is now a Series A
  • Late-stage ventures (Series C and later) has grown as a category more than Seed and Early Stage
  • Given the scale of some mega VC firms, the distinction between VC and PE is blurring
  • Startups are now staying private for more than 11 years, up from 5-8 years 20 years ago
  • Winner-take-all (blitzscaling) mentality has taken hold, that requires more capital as they burn more cash and delay profitability
  • The average late staged deal size has grown 4x, from $12m in 2009 to $42m in 2018
  • The goal of VC used to be an IPO, but now it’s increasingly to sell to a tech giant

QUARTZ – The Decade That Completely Transformed Venture Capital