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Should we chalk it up to more efficient fundraising due to Zoom calls or just the insatiable appetites of limited partners?
Whatever the reason, venture capital funds worldwide raised a record $131.3 billion in 2021, a 46 percent jump from the $89.9 billion they collected the previous year, according to exclusive research by Venture Capital Journal.
The number of funds raised last year (649) was the second largest to date and was 24 percent greater than the 522 funds that closed in 2020. The record for most VC funds closed in a single year is 679, which was set in 2018.
The largest fundraiser was healthcare investor Flagship Pioneering, which raked in $3.4 billion for its Fund VII. Rounding out the top five were tech-focused investors: Norwest Venture Partners raised $3 billion for Fund XVI, General Catalyst Group gathered $2.9 billion for Fund X, Andreessen Horowitz nabbed $2.5 billion for Fund VIII and Bessemer Venture Partners collected $2.48 billion for Fund XI.
The surge in fundraising has driven up the average size of venture capital funds. The average VC fund raised in 2021 was about $202 million, up 17 percent from $172 million in 2020. The size of funds has grown year-on-year since hitting a nadir of $85 million in 2017.
While fund sizes are growing, the amount of time required for fundraising is dropping. Venture managers spent an average of 13 months on the road last year, down from 14 months in 2020.
Venture capital continues to spread around the world, but the regional focus of most capital remains the birthplace of early stage investing: North America. Funds focused on the third-largest continent raised $66.6 billion in 2021, or 51 percent of the total. Asia-Pacific was the third most popular region, attracting $22.9 billion, or 17 percent of the total, while Europe ranked fourth, with $8.9 billion, or 7 percent of the total. Multi-regional funds raised $30.5 billion, or 23 percent of the total.
Managers are optimistic that the fundraising party will continue this year. They are in market with funds targeting a combined $175 billion. The 10 largest fundraisers are aiming for $38.7 billion combined, and have already closed on $15.1 billion of that figure. The largest fund in market is Tiger Global Management’s Tiger Global Private Investment Partners XV, which has already closed on $11.8 billion of a targeted $10 billion. The fund will invest in multiple regions and back companies in a variety of sectors.