Enterprise VC Fundraising Volumes 2010-2017
- Admin
- Jan 1, 2018
- 3 min read
Oftentimes conversations with other enterprise investors of different stages turn to questions of how "hot" the market is at that time point in time. Is it a good time for a company to fundraise? Are valuations and check sizes rising or falling? What sectors are most sought after or now out of fashion? Seed investors want to know if they should be guiding their portfolio companies to fundraise sooner or later, while later stage investors wonder if they can get better prices by hanging around the hoop for deals and negotiating harder or just waiting for founders' high valuation expectations to adjust with the market.
As an investor who focuses principally on Series A and B financings, I care about both upstream (earlier stage) and downstream (later stage) trends. If the # of seed deals is falling, this could mean that I'll be competing over a smaller handful of high quality Series As. Same concern if the # of Series As is falling, for when I'm pursuing Series Bs. If the # of deals at later stages is falling, this could signal that late stage investors have not been seeing exciting deals or are choosing to concentrating their capital into a smaller # of breakout companies, which could also hurt the odds that one of our portfolio companies will raise capital at the later stages.
It wasn't easy to find an up to date (not to mention free!) analysis that summarizes US enterprise startup fundraising volumes, so I just went ahead and created it using Crunchbase data. I performed a simple search with filters for year and stage, and used a long list of enterprise-related sector keywords to try to capture as many deals as possible(1). As such, the charts below are meant to provide an approximation of fundraising dollars, # of deals and average deal size (though I suspect they are pretty close to the real figures).
Some highlights:
Total fundraising volumes peaked in 2015 at $22B and have since fallen to $18B in 2017. Nonetheless, 2017 volumes were exceeded only in 2014 and 2015, two years which most investors look back on as unusually frothy times, and this past year's volumes were still much higher than those in 2013 and prior. Given that volumes were mostly unchanged from 2016 to 2017 ($17.7B vs. $18B), it seems the fundraising markets have found some kind of equilibrium, which I think is healthy.
The # of enterprise seed financings fell dramatically in 2017 vs. 2016 (from over 1,000 to 600, which is the smallest number of deals since 2010). I have heard anecdotally from a handful of seed investors that they are not seeing as many novel or disruptive ideas at this moment in the enterprise, and/or that the top tier teams (serial entrepreneurs, excellent pedigree) are jumping straight to Series As with large (>$500M/fund) VCs that have the dry powder to make bigger bets early on. I believe the latter point is more likely to be true - we've seen a number of really strong teams raise Series As off the bat, even pre-revenue with relatively nascent products.
Average deal sizes have gone up at every stage since 2010, though Series E and later deals plateaued in deal size in 2014. Across all stages and deals, the average round has gone from about $5M in 2010 to over $12M in 2017. This is likely significantly due to an influx of LP interest into the VC industry, yielding many deep-pocketed funds that need to make bigger bets and double down on winners in order to achieve their target returns.
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