Byron Deeter on overall venture activity: ‘This year has the potential to even surpass last year’

SaaS and cloud investor Byron Deeter of Bessemer Venture Partners looks at the overall venture activity and shares his outlook for the next year.

With the US venture activity report by PitchBook-NVCA Venture Monitor out today, Venture Capital Journal reached out to talk with Byron Deeter, partner at Bessemer Venture Partners and NVCA board member. The firm itself contributed to last year’s supersized fundraising environment, having closed on $3.3 billion in early 2021 for two funds to invest in multistage companies worldwide. And the firm is reportedly looking to launch a growth practice.

Deeter also knows what it’s like to be on the receiving end, having founded SaaS company Trigo Technologies, which IBM acquired. He joined Bessemer a year later in 2005. The UC Berkeley grad invests in SaaS and cloud tech companies and created the BVP Nasdaq Emerging Cloud Index.

With exit values, deployment and funds raised all trending up, what are your impressions of last year’s numbers?

The numbers are aligned with intuition, but it’s still surprising to see it. It’s one of those things where you’re still shocked at the magnitude of how it was a record year in every way.

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Byron Deeter, Bessemer Venture Partners

PitchBook and NVCA say that $329.9 billion was invested across an estimated 17,054 deals last year. Did you ever imagine you’d see that much activity?

As a former entrepreneur, I couldn’t have dreamed of that much capital available in the market. When I founded my business [Trigo] in 2000, it was after the dot-com crash, and it was hard work to raise $10 million. Right now, there are companies that can do that in a seed round with a few friends and a couple of phone calls. It has never been a better time to be an entrepreneur in the history of tech than it is today.

What is it like being a VC?

It’s not bad either. But certainly, the entrepreneurs have all the power and we’re happy to be a small part of their journey and to battle with each other for the privilege to work with them.

Regarding the entrepreneurs, do you see valuations continuing to climb?

We’re seeing a valuation pullback in the public market and some people are licking their wounds over it. And that will cause a little slowdown in valuations and capital deployed in the private markets.

But I see that the fund sizes are continuing, and you’ve got this latent pool of capital and dry closes and the capital not yet called. And it’s at record numbers, which suggests that new deployments will continue.

The two big numbers to look at are dollars deployed and dollars raised. Again, I think valuations could come down a bit and even the rounds sizes, too. But look at the gross tonnage, with the aggregate dollars in and dollars out. The trend line is still headed up.

We just have so much capital chasing these innovative companies that I don’t think we’re going to have a dramatic reversal this year.

Anecdotally, it feels like the hectic has continued already, would you agree?

Fundraising seems to be picking up right where we left off last year. And at current course and speed, I suspect that this year has the potential to even surpass last year, as significant as it was.

What’s driving the surge of interest in VC?

Total exit activity and a global GDP continues to climb. And that pulls the whole industry with it. When you see the world’s top market cap companies are now also venture-backed tech companies – Amazon and Facebook and Microsoft and Alphabet – you see what’s possible. That’s what ‘garage innovation’ can create. And that’s why the venture industry just had this unprecedented level of interest from limited partners into funds. That is what’s driving it

PitchBook and NVCA report US investors raised $128.3 billion last year. Will LPs have an appetite for more?

As the venture asset class has matured, it’s become accessible to a wider class of LPs. So I think that will remain, where we’ll have different types of limited partners, and their allocations increasing because [the venture asset class] now includes investments in companies in the early stage and in the growth companies, too, including those companies that used to be public.