In the world of entrepreneurship, venture capital (VC) funding is paramount. VC deals, especially those of the big, sexy, multimillion-dollar variety, are headline grabbers and the stuff of water-cooler conversation in towns like Austin and San Francisco. All that money has to come from somewhere though, right? What about VC fundraising? When a VC firm raises a fund, it rarely makes front page news. Nevertheless, whether or not VCs are able to raise funds is a critical indicator of the broader health of the capital markets and how much money is out there for budding entrepreneurs. For this reason, I was pleasantly surprised when a colleague emailed me a copy of PitchBook’s “1H 2013 Venture Capital Fundraising and Capital Overhang Report.”
As the title suggests, the report looks at two metrics: VC-fund overhang and VC fundraising. The first of these, overhang, is a measure of how much money in a private equity fund remains uncalled. In general, as Mark Heesen of the National Venture Capital Association (NVCA) notes, a high-level of overhang signals a “potential bubble, as VCs, in their quest to find a home for this bucket of un-invested capital, would presumably fund too many companies.” Conversely, low overhang results from poor fundraising and suggests anemia in the capital markets.
The second of these, fundraising, is a more self-explanatory metric. Before investing in companies, VCs typically try to raise a fund of a particular size ($100M, $1B, etc.). Once they have hit their mark, or have at least come pretty close, they start to invest the fund in companies.
Of these two metrics, the report is primarily focuses on VC fundraising. As such, the majority of the report is dedicated to discussing fundraising levels and trends from the early 2000s through 2012. A discussion and analysis of 2013-levels of overhang frames the report’s fundraising coverage.
The tone of the report is accessible. You don’t have to have a degree in finance to make sense of it. The graphics are rich, informative and approachable. Furthermore, the report is very clear on what types of funds they are covering and those that they are not (e.g. the report doesn’t include angel investment or corporate VC funding totals etc.), leaving no confusion for novice readers. Bottom Line: I’m a fan. This report, when combined with info from the NVCA, helps to paint a clear picture of what's happening in the world of venture capital.
Get the VC Fundraising and Overhang report HERE
Get Pitchbook’s 2013 VC run down HERE
NOTE: pitchbook requires you to enter your contact info to download these reports directly from the site. However, expert Googlers can get around this by doing a simple file-type search.