April 13, 2016
Q1 2016 was quite an active time for startups, especially for the ones working in financial technology space. As we have shared before, in Q1 2016, $8.494 billion have been raised by FinTech companies in more than 300 funding deals across seven segments. Such a significant success would be impossible without the VC firms that fueled the deals. As we have stepped into Q2 2016, startups looking to raise money are in hope for a reason and generosity of investors. There are reasons to believe that the next quarter may be even more fruitful for startups as according to the National Venture Capital Association, US venture capital firms raised $12 billion for 57 funds during the first quarter of 2016.
The association has declared it to be the strongest quarter in 10 years and more than the last two quarters combined. In fact, it signified a 59% increase by dollar commitments from Q1 2015 and a 17% decrease in number of funds raised. According to the report, the only time VC companies have consolidated more funds was in 2006, when in Q2, 79 funds raised $14.3 billion.
On April 11, the association published a report with data on consolidated funds, which draws a very promising future for startups in the coming months.
Bobby Franklin, the President and CEO of NVCA, commented in the press release accompanying the report, As witnessed over the last year, the fundraising environment for venture capital continues to improve. That’s welcome news for venture capital as an industry but even better for American entrepreneurs who will put that capital to work growing their businesses, hiring workers and driving innovation.
Even though Q1 2016 was a stunning success for VC firms, the president has expressed a skepticism on the continuation of the trend, adding, While it’s unlikely for this strong pace to continue, we do expect this to be a solid fundraising year when all is said and done.
In Q1 2016, 14 new funds have raised money in addition to more than 40 of the old ones. However, the overall trend suggests that despite the skyrocketing dollar-amount consolidated by VC firms, the number of funds is decreasing. In fact, Q1 2016 signifies a 33% decrease in the number of funds in comparison to Q1 2015.
The state of VC funds in Q4 2015
The dataset on the last quarter of 2015 suggests that California-based VCs are the most represented ones and have consolidated the highest funds.
More than $8 billion were raised by Californian VC funds at the end of last year. Significantly lower funds were consolidated by the VCs in 12 more states.
Across 57 funds, early and balanced stage focused funds are represented the most – 44% and 42% respectively. Seed stage funds, on contrary, are the least represented ones with only 5% of VCs categorized as such.
The stars of Q1 2016
In the last quarter of 2015, there were nine VCs that raised $500 million and more. Among them are some of the most well-known and hottest VCs such as Accel Partners, Index Ventures, Lightspeed Management Company and others.
One of the breakthroughs of Q1 2016 was California-based 1955 Capital fund, which raised $200 million for the firm’s inaugural fund, according to the report. NVCA has defined 19955 Capital as a new fund (the first fund at a newly established firm) regardless of the past experience of the partners.
The largest funds in Q1 2016 were consolidated by the Founders Fund ($1.3 billion raised). The second and third places are held by Accel Growth Fund and Norwest Venture Partners with each VC attracting $1.2 billion in Q1 2016.
One of the most impressive data points suggests that the top five VCs account for 43% the total funds raised (although it is 2% lower than in Q1 2015, it is still almost half of the total funds).