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Alternative Market Briefing

VC mega-funds raise record assets while first-time funds suffer noticeable drop

Wednesday, July 15, 2020

Laxman Pai, Opalesque Asia:

Venture capital funds that closed in the first half of 2020 had raised a total of more than $42.7 billion - "which already surpasses the full-year total for every year of the decade apart from 2016, 2018, and 2019," PitchBook and the National Venture Capital Association (NVCA) said.

VC mega-funds ($500 million+) have been especially prolific in 2020 with 23 closed so far, which nearly equals the full-year number for 2019. This uptick in outsized funds drove the 2020 median fund size back over $100 million for the first time since 2007 and also contributed to a spike in the average fund size to $300.9 million.

Notable large funds that closed this quarter include General Catalyst with a $2.3 billion vehicle and a trio of Lightspeed Venture funds each over $890 million.

Much of the success of established VCs have to do with their positive historical performance and name recognition, which has been particularly helpful in a period when no face-to-face meetings are taking place.

First-time funds have seen a noticeable drop in new closed funds through Q2 2020, only raising $1.5 billion across 14 vehicles. This is likely due to an inability to capitalize on existing investor relationships, and it doesn't look like first-time fundraising activity will rebound in 2020, as economic uncertainty could encourage LPs to cut down on new allocations to VC, especially to unproven managers.

Exit activity totals to $45.3 billion in 1H......................

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