The full presentation deck for the survey is linked here. For current or aspiring venture managers, I’d also recommend checking out the 2018 benchmark compiled by Different Funds, which largely focuses on venture fund term trends.
Our raw data was gathered from 110 funds from over 50 unique emerging manager firms — we primarily defined “emerging manager” as firms that were on a Fund III or below, and the majority of funds were sub-$100 million in size.
As we dug into the data, many interesting trends came to the surface.
Female-led firms not only had the longest fundraising periods (16 months) but also raised the least amount of capital on average ($31 million). More eye-opening was that this group in our data set had the most prior venture investing experience — in our study only 15% of female-led had no prior institutional investing experience. While some skew may be present given the small sample size, we believe a larger study would yield similar results and would further offer clear signal that gender imbalance and inequity still exist.
Further, general partner (GP) teams that had gender diversity — that is, where the gender mix was at least 33% women / 67% men or better — actually raised the largest average funds ($41 million) and took the least amount of time to fundraise at only 10.6 months.
First-time managers with no previous venture experience actually raised their funds quicker on average (10.6 months) than their colleagues that had prior institutional experience (13 months). While counterintuitive, the data makes more sense when assessing the average raised by first-time managers ($13 million / partner) versus those with prior institutional experience ($24 million / partner).
The fundraise duration was nearly identical for sole GP funds (11 months) versus multiple GP funds (12 months). As expected, the latter group raised much larger funds, with a median raise amount of $41 million versus $25 million for single GP funds.
It is also clear that institutional limited partners (LPs) generally preferred backing managers with prior venture experience. On average, 29% of total dollars raise were from institutional LPs for funds raised by first-time managers versus 42% for managers that had prior venture investing experience.
Interestingly, the amount of institutional backing dropped precipitously for both groups post-2016, which we believe to be directly correlated to the slowdown in institutional backing to Fund I offerings.
As we’ve discussed expansively in the past, before raising institutionally backed funds, first-time managers commonly must raise proof of concept funds with capital coming from high net worth individuals and family offices. In looking at our data set, only 15% of Fund I managers were able to raise second funds that included at least 50% of capital from institutional LPs, implying the proof of concept path may likely require 2+ funds.
Performance and portfolio metrics
Average portfolio size for funds in our study was ~30 companies, with the largest portfolios being found in funds <$25 million (36 companies on average).
Performance for sole GP funds in our data set was quite robust, peaking at a multiple on invested capital (MOIC) of 3.2x for vintage 2015 funds.
In aggregate, performance was also best (1.98x MOIC) for portfolios that contained >30 portfolio companies — hardly surprising given that the majority of funds in the data set were seed funds, many of which have enjoyed a mark-up heavy environment.
Special Purpose Vehicles (SPV’s) were most used by funds in the $25 million - $50 million range, with 54% of funds indicating they used SPVs for follow-ons, and the vast majority charging carry economics of 10% ‑ 20% to participating LPs.
We also looked at average ownership and check sizes by fund sizes and found the following:
|Average Initial Check Size
|Average Post-Money Valuation
So what is coming down the venture fund pike in 2019? No one can predict the future, but as the above data indicates, these are interesting, exciting times in that arena. A fascinating article in Bloomberg recently noted, “VC funds in the U.S. raised $55.5 billion from investors last year, according to a new report from the National Venture Capital Association and PitchBook — that’s the most since the dot-com era, and far more than last year’s $34 billion.” We’re at an interesting point where access, enthusiasm, increased diversity and growing resources are building synergy. Arming with the right data, we can be poised to make the most of the moment.