Entrepreneurial current events: the state of the venture industry
No surprise, but 2010 wasn’t a great year for venture capital. In November, the NVCA (National Venture Capital Association) came out with its 2011 report. The report summarizes the state of the industry last year. Capital under management, headcount, and fundraising all declined. Investment totals were up from 2009 depressed levels, but still below 2008 levels and well below the 2002-2008 trend line. Over 1000 companies were funded by VC firms. IPOs were up but totals have to increase far beyond 2010 levels for a sustainable industry. A record number of venture-backed companies were acquired, but the total proceeds from those purchases were far from a record. Investors aren’t seeing returns.
In contrast, I read a NY Times article about how Peter Thiel (of PayPal) raised $625 million for his fourth Founders’ Fund — larger than his first three funds combined. The Founders Fund success highlights the “widening gap in Silicon Valley between the top-performing, or best-branded, firms and the rest of the industry.”
The article also reports, “Many of the biggest venture firms, like Accel Partners and Sequoia Capital, have been able to raise hundreds of millions this year, in heavily oversubscribed rounds. Meanwhile, investors are also flocking to younger firms, with prominent technology leaders. On Thursday, for instance, Steve Case, a co-founder of AOL, announced the raise of a $450 million fund for later-stage start-ups. But these are the exceptions.”
So, the venture industry continues to shrink, but the top performers are going strong. Pick your firm carefully, entrepreneurs!