Venture capital fundraising smashed records in 2021
While US venture capital firms raised a similar number of funds in 2021 when compared to 2020, the amount raised was far greater.
Nearly half the number of funds raised in 2021 were under $50 million in size, matching a peak set in 2018, yet 39% of the capital raised went to funds that were $1 billion or larger. A record 23 funds sized over a billion dollars closed in 2021, up from 14 in 2020.
The $128.3 billion raised last year by 730 funds was more than 1.5x the amount raised the prior year, which was at that time record breaking. A new all-time fundraising record was thus set in 2021, bringing cumulative dry powder in the industry to an all-time high of $222.7 billion.
Familiar trends persist in fundraising efforts.
These record-breaking fundraising statistics are fueled by trends that have been in place for several years. One can only predict that these trends will continue through the market volatility in early 2022.
Trends that continue to fuel fundraising:
Limited partner demand for the asset class
The growing opportunity set as technology companies stay private longer and continue to scale in the private markets
Venture firms becoming “full stack” investors that invest across all stages of a startup’s life cycle, creating a competitive advantage
The concentration of capital among a set of large, established venture firms also persisted.
The concentration of capital among a set of large, established venture firms also persisted. The number of first-time funds raised fell to a seven-year low with more experienced managers (defined as those with four or more funds) accounting for almost 70% of the total raised.
It was not surprising to see the average fund size continue its steady climb since a trough in 2013, while the average time between fundraises continued its gradual decline, from 3.3 years in 2013 to 2.5 years in 2021. Anecdotally, limited partners can relate to these statistics – the sense that managers have been coming back to market more quickly with larger funds has become quite common. And in fact, the median step-up in fund size between fundraises was a record high in 2021 at 64%.
Fund sizes increase while fundraising cycles decrease