Venture Capital Association Partners with PitchBook to Shed New Light on Venture Landscape

The National Venture Capital Association (NVCA) yesterday announced it has partnered with research company PitchBook Data, Inc., to launch the PitchBook-NCVA Venture Monitor, an informative new quarterly report that offers a comprehensive portrait of the venture capital landscape. The first-edition report replaces an older quarterly publication that NVCA produced using data from Thomson Reuters.  

$43 billion is projected to flow into VC firms in 2016. That’s the largest annual influx of capital to these funds since the dot-com craze of 2000.

“PitchBook has cemented itself as the clear leader in the market of private capital data sources, and we’re proud to be working with them to establish the Venture Monitor as the benchmark report on venture capital activity,” commented Ben Veghte, vice president, communications & marketing for the NVCA.

John Backus, co-founder and managing partner of New Atlantic Ventures

The new report, published Thursday, includes not only traditional venture capital firms but also micro VCs, seed and angel funds, as well as corporate venture groups and larger institutional players that provide later-stage expansion capital. The result is a more comprehensive portrait of the full spectrum of venture investing, from its earliest stages to later stages of large-scale company expansion.  As John Backus, an NVCA Board Member commented, “We have greater fidelity with the data, we can now see things that were difficult to extrapolate in the past. It really helps to organize data by category so we can understand the larger, broad takeaways.”

Pitchbook projects that $43 billion will flow into the coffers of venture capital firms in 2016. That amount represents a 20 percent increase over 2015, and is the largest annual influx of capital into the venture community since the dot-com craze of 2000. Although in 2016 venture firms have invested slightly less capital than the previous year, this new inflow of money into VC funds suggests that higher levels of startup investment will resume in 2017.

This capital, however, may continue to be increasingly concentrated in fewer, larger deals. As the report drily puts it, “As companies have secured massive amounts of capital over the last few years, investors have looked to utilize a more targeted approach to how they invest, which encompasses making fewer but larger bets.”

Among the interesting trends the report illuminates is the growing importance of late-stage private equity firms, large institutional funds that are investing tens and sometimes hundreds of millions of dollars in established companies like Airbnb and Uber. As the report makes clear, these extremely large investors have helped create a pathway for large startups to bypass the slowing IPO market and remain private while receiving large infusions of capital.

The report also highlights the significant role of corporate venture groups, which have been scouting for investments and acquisitions to fuel revenue growth at a time when many have been slashing internal R&D spending. Corporate acquisitions doubled between 2015 and 2016, with a median venture-backed exit size of $100 million. Some of the growth in Q3 2016 can be attributed to a few mega-deals for companies like Jet and Dollar Shave Club, both acquired for more than $1 billion.

In addition to shedding new light on later-stage venture capital, the report for the first time covers very early-stage investor groups like micro-VCs, seed funds and angel groups. Overall, the total amount of money invested by these groups has declined, but the size of these early-stage deals has gone up. As the report explains, “The median seed deal value has made an enormous jump to $1.5 million during 2016, 50% higher than the median of 2015 and triple the median value from just three years ago.”

Pitchbook has a comprehensive database of private equity and venture capital activities.

Despite that jump and the growth in later-stage funding, the number of firms providing mid-stage financing — the territory traditionally controlled by VC firms — has remained relatively constant.  The result is that, although more companies are receiving early funding, there is acute competition for capital to fuel their next phase of growth. “More VCs are getting into seed investing than ever before,” said Garrett Black, senior analyst at PitchBook. “But at later rounds, investors are setting higher and higher benchmarks as companies mature, evaluating real metrics like revenue and user numbers in lieu of projected growth. These higher hurdles have led to a sort of funding bottleneck at the later stages.”

The full new report can be found at: https://pitchbook.com/newsletter/the-inaugural-pitchbook-nvca-venture-monitor.