Investment Trends at Top Venture Capital Firms In 2014 (So Far)

Good, publicly-available data on funding trends is scarce, and I find that most people interested in this data end up being spoon-fed by TechCrunch. I wanted to see what I could dig up so this post is a summary of some poking around I performed on my own. You should consider the findings with a grain of salt as this analysis isn’t based on serious research frameworks. I looked at a small set of firms, and my use of Crunchbase as a data source has its obvious limitations. With that out of the way, let’s dive in!

Before I get to the data, a tricky question: just who are the top VCs? It’s like asking what the top NBA teams are – Do you only consider win-loss record? How about the number of superstars on the roster? What about a metric like wins/dollars spent, which might indicate teams doing more with less? I think this last point resonates particularly with the younger VC enthusiasts. I dug around and found this response on Quora, which seems like it has some reasonable research backing it up. From there, I scraped some more data. Here are the VCs used for this analysis:

Top West Coast VCs

Firms Funds Under Mgmt Investments in 2014 Avg Round Partic.
Accel Partners $12.2B 23 4
Sequoia Capital $2.4B 15 3
Greylock Partners $2.5B 11 6
Andreessen-Horowitz $2.65B 8 8
Benchmark $850M 2 5

Top East Coast VCs

Firms Funds Under Mgmt Investments in 2014 Avg Round Partic.
Bessemer Venture Partners $1.6B 12 4
First Round Capital $263M 11 6
General Catalyst Partners $1.18B 8 3
Highland Capital Partners $1.13B 8 5
Union Square Ventures $500M 3 2

Top Micro VCs

Firms Funds Under Mgmt Investments in 2014 Avg Round Partic.
Founder Collective $110M 5 6
Founders Fund $2.15B 4 6
Felicis Ventures $119M 3 6
Floodgate $149M 3 4
Harrison Metal n/a 3 6

You may have noticed that your favorite VC is missing from this list. You may also have caught the weird fact that a firm with $2B under management is listed as as a Micro fund. (In fact, Founders Fund just raised a billion dollars last week!) Okay, so it’s a bit messy but not terribly important.

Next, I scraped the most recent investments made by these firms since the start of the year. You can find the raw data here. I sliced and diced it a few different ways and came up with some interesting results:

Venture Capital Firms Are Not All The Same

It seems  like an obvious point but I think it’s an important one for keep in mind. Each VC has their own investment thesis, and even the top VCs differ quite a bit in fund size, portfolio size, and investment strategy. 85% of the startups examined had only one top VC invest in them. If you’re an entrepreneur seeking investment, it pays to do thorough research and target your pitches to VCs that fit your particular niche. The data on the top funds shows significant varience in the number of investments made so far this year.

It’s surprising to see Union Square Ventures so far down. Perhaps this can be attributed to the fund lifecycle or seasonal factors (post-new year slump). I’d also like to point out that the two funds with the largest number of investments – Accel Partners and Sequoia Capital – have smaller participant sizes in their rounds. Without digging further, my guess is that they are either choosing to invest in rounds where they can take a larger share or they are investing in companies that other VCs aren’t able to access.

While each top VC has unique qualities that define them, overlapping interests do occur. ClearSky Technologies, for instance, had 5 of our top VCs in its latest funding round out of 7 total participants.

Preconcieved Notions

The East Coast has always been stronger in the advertising, finance, and media, and I get the sense that the proportion of startups in these sectors tend to be higher on the East Coast as well. One might assume, then, that VCs in Silicon Alley would be more focused on these sectors than their West Coast compadres, but our data on top VCs contradicts that idea.

So far in 2014, the top East Coast VCs have funded 0 advertising startups, 1 eCommerce startup, 1 news/media startup, and only 2 finance/venture startups. Compare this to the top West Coast VCs, which have funded 1 advertising startup, 7 eCommerce startups, 3 news/media startups, and 4 finance/venture startups. On the other hand, top East Coast VCs beat top West Coast VCs 4-0 in the education sector, which surprises me a bit given that the companies that come to mind when I think of education – Khan Academy, Coursera, etc. – are all based on the West Coast. Fashion turns out to be equally distributed – 2 for East, 2 for West, 2 for Micro.

So what should we make of this? First, the focus of top VCs isn’t limited to their region. Opportunities in consumer internet technology are global and so is the perspective at these firms. Our sample size is too limited to really make the case that a specific VC population is focusing on these sectors, but founders should remember not to limit themselves by pitching only to local VCs simply because the market is there.

Top VCs Like Very Valuable Companies

If you’re a founder and you’d like to raise seed funds from top VCs, then listen up. According to the data on funding so far this year, your company should be looking to raise ~$3M and you should expect to raise that money from ~8 investors. Our analysis leaves out many seed-stage firms that have been gaining a lot of traction in the past 5 years so this doesn’t mean your company needs a valuation that is a healthy multiple of $3M in order to raise a seed round. However, this could be good guidance for anyone considering one of these firms for an investment.

Invesments Per Round

Round Investments by Top VCs All Investments (Crunchbase) Average Round Size Average Participants in Rounds
Private Equity 2 1628 $67B 8
Seed 18 15380 $3M 8
Series A 24 9634 $13M 4
Series B 29 5735 $15M 4
Series C 17 2929 $42M 5
Series D 3 1306 $21M 4
Series E 4 509 $66M 7
Series F 1 173 $134M 6
Series G 1 2 $30M 6
Venture Round* 20 $28M 4

Most investments are taking place at the earlier rounds which isn’t surprising. In general, the distribution of investments for each round from our data aligns pretty well with Crunchbase in aggregate. The average number of participants starts high in the seed round, halves for Series A through D, and climbs back up at Series E. VC participation in the later rounds may be increasing because companies at these stages have realized much of their potential and are preparing for big exits.

The Hottest Startup Sectors

The top 5 sectors (by the number of startups) that our 15 VCs are investing in so far this year are software, mobile/wireless, enterprise, eCommerce, and health/fitness, in that order. These 5 sectors make up approximately 50% of all our startups.

Percentage of Startups Funded in Each Sector

The order shifts a bit when we break it down financially. The biggest movers are eCommerce, representing 7.6% of firms but taking 18.2% of the funds, and Mobile/Wireless, representing 10.9% of firms but taking only 5.4% of the total funds invested. This could be evidence that mobile companies require less capital to grow, but our data is rather limited for that kind of generalization.

Percentage of Capital Invested in Each Sector

And that wraps it up. Hopefully, I’ll be sharing more analysis with you guys in the future. If you found this interesting, make sure you follow our blog!

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