In my last post just a few days ago, I indicated that I did not feel that venture capital in general was in a bubble, but that the situation should be monitored closely because "if venture capital fund raising levels spike up, then more money will lead to higher entry valuations and exits, which could easily lead us into a bubble." I watch a number of metrics to see if there's a bubble, among them venture capital fund raising levels, investment levels, health of the public markets, exit levels and valuations (both entry and exit). I believe that venture capital fund raising can be a leading indicator of the future health of the venture industry. Before the bubble, VCs would tell me that the venture industry was a $20 billion a year industry - this being money invested into companies. My sense today is that the industry has expanded to encompass more strategies, but that a basic tenet continues to be that too much money is bad for the venture industry.
Yesterday, Thomson Reuters and the National Venture Capital Association released the first quarter fundraising totals. In the release, they indicate that 58 funds raised $8.9 billion in the quarter. If this trend continues, then venture capital funds could raise nearly $40 billion in 2014, a very large number. What is more troubling to me is that with the recent growth of corporate venture capital groups, angel investors, incubators and crowdfunding, there will be much more than $40 billion invested in deals. This comes in a time when startups need less capital than ever to get started.
In my view, the news that venture capital funds raised $9 billion in the first quarter is concerning. While I still don't think we are in a bubble today, this news suggests that a bubble could be coming in the future.
Thomson Reuters / NVCA release:
http://thomsonreuters.com/press-releases/042014/venture-capital-funds-strongest-fundraising-quarter-since-2007
My prior post:
http://www.allenlatta.com/1/post/2014/04/is-venture-capital-in-a-bubble.html
Yesterday, Thomson Reuters and the National Venture Capital Association released the first quarter fundraising totals. In the release, they indicate that 58 funds raised $8.9 billion in the quarter. If this trend continues, then venture capital funds could raise nearly $40 billion in 2014, a very large number. What is more troubling to me is that with the recent growth of corporate venture capital groups, angel investors, incubators and crowdfunding, there will be much more than $40 billion invested in deals. This comes in a time when startups need less capital than ever to get started.
In my view, the news that venture capital funds raised $9 billion in the first quarter is concerning. While I still don't think we are in a bubble today, this news suggests that a bubble could be coming in the future.
Thomson Reuters / NVCA release:
http://thomsonreuters.com/press-releases/042014/venture-capital-funds-strongest-fundraising-quarter-since-2007
My prior post:
http://www.allenlatta.com/1/post/2014/04/is-venture-capital-in-a-bubble.html
