VC firms raised $35.5B last year, the most since 2006

The number of first-time fund managers drop 30% to 72 from 103

Many are expecting venture capital investing to tighten up this year, as the markets, both public and private, began to recede in the second half of last year. Despite that slowdown, 2015 still managed to be a pretty great year for venture capital. Not only did the industry see the second highest amount invested in the last 20 years, but also the second highest amount raised in the last 10.

There was $35.5 billion in total capital committed to VC funds in 2015, according to PitchBook's PE & VC Fundraising & Capital Overhang Report. That is the second-highest total of the decade, surpassed only by the $36.4 billion raised in 2006. It's also a 4.7 percent increase from the $33.9 billion raised in 2014.

At the same time, though, the number of funds raised actually dropped 6 percent year-to-year to 242 from 258 in 2014. The most popular-sized fund raised was under $50 million funds, with 124, or more than 50 of the fund. Those small funds raised $1.2 billion, or 3.3 percent of percent of dollar volume.

First-time fund managers also saw a similar situation, matching 2014's sum of $3.4 billion, while also seeing the fund count drop from 103 to 72, a 30 percent decrease year-to-year.

That, no doubt, was the result in the overall slowdown in the venture capital market, as the 53 funds closed in the fourth quarter was the lowest number since the third quarter of 2013.

"The dealmaking climate has cooled. Liquidity has become a chancier prospect, particularly for many latestage, heavily financed startups. Fundraisers are forward-looking, but LPs are cautious, still open to commit but wishing to see what happens in 1Q," Pitchbook wrote in the report.

"As public market valuations soften, private comparables will correct in turn, potentially paving the way for a resurgence in activity far down the road. But as investment declines gently for now, fundraising will likely follow suit or plateau, as investors seek to put dry powder to work at a slower pace, and consequently take longer to fundraise as well."

Still, the vast majority of funds, over 85.9 percent of them, hit their target last year, just beating out 2014's previous decade record of 84.8 percent. 

When it came to size of the funds, 21 percent of the number of funds raised in 2015, or 51, closed between $100 million and $250 million, the highest percentage since 2009. That equals a total of 51, the highest number in the last decade. There were 34 funds of at least $500 million.

Over the last two years, close to $21 billion has been amassed by funds of at least $1 billion, across 12 funds, seven of them raised in 2014 and five in 2015.

Micro funds

There were 124 micro VC funds raised in 2015, down 14 percent year-to-year from the 145 raised in 2015, but that was still the second most this decade, by far. Those micro VC funds raised $1.2 billion in 2015, down nearly 30 percent from the $1.7 billion raised in 2014.

Things will likely contract in the coming year, though, according to the report.

"The fact that the seed stage has broadened and diversified into what can be several tranches has helped establish a fertile playing field for such micro funds, enabling them to sign on to initial financings and even invest in follow-ons given suitable size ranges before fund economics become a limiting factor," it said.

"The likely deflation in seed financing sizes and valuations will create a more welcoming environment for investors, but the level of competition will remain elevated, probably resulting in consolidation."

Venture capital investing

On the other side of the equation, there was $58.8 billion of venture capital dollars invested throughout 2015, the second highest amount invested in the last 20 years. 

The numbers in the United States mirror closely what happened globally to venture investing in Q4. There was $27.3 million invested in 1734 deals in the fourth quarter of 2015, a 30 drop in funding quarter-to-quarter, while deal activity fell 13 percent. That was the lowest amount of deal activity seen in nearly two years, going back to the first quarter of 2013, and it broke a streak of six quarters in a row with at least 2,000 global deals.

In the U.S. it was later stage deals that took a big hit, while seed stage deals rose sharply in the last quarters. 

Investments in later stage companies dropped 33 percent to $3 billion going into 169 deals in the fourth quarter. The average Later stage deal in the fourth quarter fell to $17.8 million, down from $20.9 million in the prior quarter.

Seed stage companies, however, saw their dollars jump by 55 percent, to $375 million. Early stage companies, however, also saw a drop, going down nine percent in dollars and 18 percent in deals with $4.9 billion going into 494 deals.

Largest VC funds of 2015

Some of the biggest funds raised in 2015 have included Bessemer Venture Partners, which raised $1.6 billion for its IX Fund; Flagship Ventures Fund, which raised $537 million for Fund V; August Capital, which raised $450 million for its Fund VII; Institutional Venture Partners XV, which raised $1.3 billion for its Fund XV; and Social Capital Partnership, which raised $600 million for its Fund III.

The really big one, though, was New Enterprise Associates 15, which raised $2.8 billion. That makes it the largest all-time early stage venture capital fund since records began in 1980.

(Image source: 360alumni.com)