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SoftBank's $100B Vision Fund, along with unicorns staying private longer, are driving larger funds
Earlier this year, SoftBank Group and Saudi Arabia’s sovereign-wealth fund partnered to create what is known as the "Vision Fund," by far the largest fund ever raised with a whopping $100 billion.
Now, what once were astronomical figures are relatively quaint in comparison. As a result, the VC space might be entering a new age of venture capital: the mega-mega -fund, as other venture capital firms scramble to keep pace.
One of those firms is Sequoia Capital which is, according to a report out from Recode late Tuesday, is looking to raise between $5 billion and $6 billion for its third global growth fund. Remember that it was only just a couple of years ago that NEA raised $3.1 billion for what was then a record amount for a VC fund.
The last time Sequoia raised a new fund it was a $2 billion fund back in 2015. This would obviously be its largest fund yet, though, as Axios points out, it actually falls in line with the same growth percentage from the firm's first $750 million fund and its second $2 billion fund.
Not all of this can be put on SoftBank; the Vision Fund seems more like a symptom of larger trends, though it will certainly exacerbate some of them.
For one, funds have been getting larger in general, partially thanks to the rise of unicorns who are taking longer and longer to exit. That means that later stage funds, like Sequoia, have to have more money on hand to continually reinvest. According to the National Venture Capital Association, median fund sizes in this year are up 87 percent from funds raised just two years ago. With $24.4 billion raised in the first three quarter, 2017 is on pace to become the fourth consecutive year with more than $30 billion in fund commitments.
That has corresponded in larger round sized. Data from Pitchbook shows that VC activity hit a record high in 2017, with fuds investing more than $148 billion globally. The previous high, reached in 2015, was $142.8 billion. Meanwhile, the number of deals has been declining, meaning the round sizes are getting larger as well.
Combine all of these trends together and a $5 billion VC fund all of the sudden doesn't seem quite as large as it once did.
Founded in 1972, Sequoia has seen 264 exits, and has invested in companies with a total public market value of over $3.3 trillion. Its portfolio includes Apple, Google, Oracle, PayPal, Stripe, YouTube, Instagram, Yahoo! and WhatsApp.
VatorNews reached out to Sequoia Capital for confirmation of this report, but the firm had no comment.
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Sequoia Capital is a venture capital firm founded by Don Valentine in 1972. The Wall Street Journal has called Sequoia Capital “one of the highest-caliber venture firms” and noted that it is “one of Silicon Valley’s most influential venture-capital firms”. It invests between $100,000 and $1 million in seed stage, between $1 million and $10 million in early stage, and between $10 million and $100 million in growth stage.