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That loud thud you heard at the end of the first quarter was global venture capital fundraising falling back to earth.
Managers scraped together a combined $26.7 billion, less than half of the amount they raised in Q1 for each of the two previous years, according to Venture Capital Journal’s exclusive research. The amount was the lowest figure since the first quarter of 2019, when VCs around the globe collected a combined $24 billion.
Worse, the number of funds that closed was a meager 88. If that pace continues, the total number of funds for the full year will come in at just about 350 – down from 785 in 2022 and a record 1,252 in 2021. The last time that venture firms closed on 350 or fewer funds was 2010.
With the number of funds shrinking so dramatically, the average fund size hit an all-time high of $322 million in Q1. Three funds in excess of $1 billion – including two from New Enterprise Associates – helped to skew the average. The Q1 average is the largest amount since VCJ started collecting fundraising data in 2008. It is also 36 percent bigger than the average fund size ($237 million) for the full year of 2022 and more than twice the average of $155 million in 2021.
Asia-Pacific takes a hit
North America remained the favorite region for newly closed funds, with 47 percent of funds identifying it as their primary investment region. Funds with a multi-regional focus saw the biggest gain, surging from about one-fourth of the total in 2022 to 33 percent in Q1. Asia-Pacific funds experienced the biggest decline, going from 18 percent of the total last year to 13 percent in the first quarter. Europe-focused funds also declined slightly to about 5 percent of the total, down from 6 percent last year and 7 percent in 2021 and 2020.
NEA goes big
The two largest funds that closed in Q1 came from New Enterprise Associates. The firm closed on $3.2 billion for NEA 18 Venture Growth Equity, which has a multi-regional focus, and $3 billion for its flagship New Enterprise Associates 18, which also has a multi-regional focus. Bain Capital was the only other manager to close on $1 billion or more, capturing $1.4 billion for Bain Capital Venture Fund 2022. The 10 largest funds accounted for a significant share of the overall fundraising tally. They raised a combined $12.4 billion, or 46 percent of the total amount. That was a big jump from the full year 2022, when the top 10 funds accounted for about 32 percent of the total amount.
Won’t stop believin’
The paltry fundraising result for Q1 wasn’t due to lack of trying. Venture funds in the market as of April 24 were targeting nearly $260 billion. Funds focused on North America accounted for the biggest slice of the pie, targeting a combined $116 billion, or 45 percent of the total. Asia-Pacific funds ranked second ($59 billion, 23 percent), followed by multi-regional funds ($57 billion, 22 percent). The combined total for funds focused on Europe, MENA, Latin America and Sub-Saharan Africa accounted for 10 percent of the targeted amount.
Click here to download the data from the report.