Direct investment in smaller deals in early companies are so much work compared to other kinds of investment opportunities available to them. Most sources of significant capital don’t have the time or the inclination to be an active investor in this sector. And as even better news, this is a very difficult and time-intensive asset class.
So what does all this mean? Why should you care? Well, if you are interested in raising a new fund, there appears to be a lot of capital available to invest into early stage companies.
We have seen data from other sources that support activity levels more than twice that shown in this chart. And the numbers shown in the chart below represent just the data that Pitchbook was able to gather. Just in the past 8 years, total US-based angel investments per year have grown close to 4X. Angel investments are coming from multiple sources, including groups of angels working together in networks both formal and informal, networks of angels coming together into syndicates, angel funds, family offices, and syndication platforms (such as AngelList, etc.). In addition, angel investing is reaching new heights in terms of deals and investment dollars. Regardless of why it is happening, it is clearly an important trend in our current market. Others attribute this to a desire to allow more innovation to flourish indirectly despite the more mature conservative corporate culture by owning minority investments in nimble start ups.Īnd still others attribute it to a desire to have an inside track on acquiring attractive start-ups before they raise a ton of venture capital and have their required acquisition price go through the roof. Some attribute this to a trend to reduce capital risk by “outsourcing” research and development to startups who are financed by third parties and then investing in or acquiring the ones showing promise. As you can see in the charts below, in just under 10 years, US Corporate Venture has gone from ~25% of total venture investment dollars to ~44% of the total dollars. Corporate investors, in particular, are having a major impact on the investment community. In addition to traditional VC funds, there is significant growth from new types of investors focused on Corporate, Government, University and Social Impact goals. If you add statistics from the rest of the world to this data, the growth is even more dramatic. Growth in venture investing has more than doubled in the US over the past decade as shown in the chart below. These days, funds are popping up almost everywhere. One of the biggest trends we witnessed over the past few years is the rapid pace of new early stage venture fund formation combined with significant growth in the amount of capital invested.Ī decade or two ago, most of the new funds were traditional VC funds located in technology hubs in the US and a few other countries around the globe. We also read three or four newsletters which focus on activities within the venture community. In the course of a single day, Christopher and I scan dozens of articles, newsletters, blog posts, and the occasional book chapter or industry podcast. Staying on top of the early stage investing world requires a lot of reading.
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Note: This article is the fourth in an ongoing series on venture fund formation and management. To learn more about managing a fund, download this free eBook today Venture Capital: A Practical Guide or purchase a hard copy desk reference at.
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