Friday Letter: What to expect next after a record-setting 2021

Byron Deeter looks at the jaw-dropping numbers of 2021 and looks ahead to the coming year.

The PitchBook-NVCA Venture Monitor report came out early this morning. And, to no one’s surprise, there were some jaw-dropping numbers in the full-year report, with dollars deployed and funds raised by US venture firms breaking records with stunning amounts.

I say it was no surprise since we’ve tracked the funds and the deals, and we’ve reported on how venture firms are not only coming back sooner to market with successive vehicles but are also raising additional ones, including seed-stage and opportunity funds.

Our own VCJ 50 report, published in November, found that the top 50 venture firms worldwide had secured $211.9 billion in commitments in the previous five years. This was nearly 30 percent more than what the top 50 had raised over the five years to 2020.

The venture biz has exploded, as everyone involved certainly knows from living and breathing in the hectic environment of the last few years.

Byron Deeter, an NVCA board member and a partner at Bessemer Venture Partners, summed up the robust activity when he told me this week: “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.”

But what happens next is on the minds of a lot of investors. Is the current pace of fundraising too rapid for LPs? After all, they are concerned over how new funds are larger and closing so soon after the previous vintages, as Venture Capital Journal has reported.

Deeter said that if a public market reset were to continue for an extended period, the venture class could see denominator pressure for LPs to rebalance their portfolios. However, he added that the variety of LPs and the breadth of venture investing from seed to late-stage meant that growth would be likely to continue for the venture community.

“As the venture asset class has matured, it’s become accessible to a wider class of LPs,” he said. “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.”

What’s on your mind as we steamroll into 2022 with the momentum of 2021, the biggest year on record for venture?

Let me know what your thoughts. You can ping me up at agoldfisher@buyoutsinsider.com.