Venture Capital Funds on Track for Record Fundraising Year

Funds raised in 2020 have already surpassed 2019’s total, say PitchBook and the NVCA.

Michael Nagle/Bloomberg

Michael Nagle/Bloomberg

The coronavirus pandemic isn’t keeping investors from pouring billions into venture capital.

As of September 30, U.S. venture capital funds closed this year had raised $56.6 billion, according to a report from PitchBook and the National Venture Capital Association that’s expected to be released Tuesday. This is more than $54.9 raised in all of 2019, and less than $12 billion shy of 2018’s record fundraising total of $68.1 billion.

According to PitchBook, investors have continued to make “robust” commitments to venture capital funds this year despite the fundraising challenges and market uncertainty brought by the pandemic. This is in contrast to the slowdown seen in the larger private equity industry, with Preqin reporting last week that global fundraising had dropped to its lowest quarterly total since at least 2015.

“Despite continued uncertainty throughout the year, the rebound in public markets has given investors confidence,” John Gabbert, founder and chief executive officer of PitchBook, said in a statement on the VC report. “As investors seek growth opportunities in a low-rate environment, the growth potential of the venture strategy continues to entice both traditional LPs and nontraditional investors.”

Most of the fundraising has been driven by large funds, with the average fund size increasing to $257.2 million — nearly double the average last year. According to PitchBook, mega funds — those with at least $500 million in assets — accounted for 15.3 percent of total funds raised so far this year.

[II Deep Dive: VC Fundraising Hasn’t Slowed Down — For the Big Funds]

Mega funds that closed in the third quarter included’s $2 billion Climate Pledge Fund, as well as new investment vehicles from Greylock Partners and Meritech Capital Partners.

“Greylock and Meritech are storied Silicon Valley firms with established LP bases and track records that allow them to raise new funds during this uncertain time,” PitchBook said in its third-quarter venture capital report.

First-time managers, meanwhile, face a “herculean task” in raising capital in 2020, according to PitchBook. The data firm reported that first-time fundraising activity has plummeted to a record low of 3.4 percent of total capital raised so far this year.

In total, just 30 first-time funds had closed as of September 30 with $1.9 billion in commitments — a fraction of the $5.3 billion raised by 81 first-time funds in all of 2019.

“The consolidation of capital continues toward larger, later stage companies and established VC funds,” Bobby Franklin, president and CEO of NVCA, said in the statement on its report with PitchBook. “While both of these trends are potential signs of concern for the long-term health of the VC lifecycle, overall the ecosystem has shown strong resiliency in the past six months.”