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PE fund sizes
getting smaller,
taking less time to close
VC fundraising continues at rapid clip, 91%
beat targets through 1H
VC overhang
rises for first time since
2007
PE fundraising more
in line with investment
activity versus 20076-74 11-12 15
CONTENTSIntroduction
PE Fundraising Overview
PE Fundraising by Fund Size
PE Closing Times
PE Capital Overhang
Secondaries
VC Fundraising Overview
VC Fundraising by Fund Size
Venture Capital Overhang
Largest Open U.S. Funds
Methodology
3
4-5
6-7
8
9
10
11-12
13-14
15
16
17
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ContentALEX LYKKEN Editor
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RESEARCH
EDITORIAL
SALES
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PE fund sizes
getting smaller,
taking less time to close
VC fundraising continues at rapid clip, 91%
beat targets through 1H
VC overhang
rises for first time since
2007
PE fundraising more
in line with investment
activity versus 20076-74 11-12 15
2 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
IntroductionWhile most headlines on the U.S. PE and VC markets focus on deal flow and valuations,
investors have quietly re-stocked their coffers on the fundraising trail. Few believe that either market can sustain their booms indefinitely, which makes fundraising a key priority while LP confidence is high. About 90% of both PE and VC funds hit their targets in 1H, a historical anomaly. Across both asset classes, if and when a downturn occurs, investors will have plenty of capital on hand to take advantage of future conditions.
On the PE side, it’s becoming evident that investors have become more conservative fundraisers and disciplined buyers. As we show on the next page, the correlation between fundraising and deal activity has become much more stable in recent years. Additionally, the average and median PE fund sizes have dropped since 2013; both the average and median hit their lowest points in 1H since 2004. Though fund sizes are smaller, GPs are benefitting by spending less time on the fundraising trail. On average, PE funds that closed in the first half were in
the market only 13.9 months from start to end.As for VC firms, it appears that fundraising
trends are closely following VC activity. On page 11, we graph out the same comparison between VC financing activity and fundraising levels. The correlation between the two is much different compared to the PE asset class. VC fundraising actually outpaced total financing activity in 2006 and 2007. Since 2009, the disparity between the two has gradually increased, especially last year. What’s interesting is that VC fundraising closely followed the high trajectory in financing activity in 2014, despite the latter being skewed by non-traditional investments by hedge funds and mutual funds. In other words, it seems that VC firms are taking advantage of current market conditions to cushion against an inevitable downturn.
We hope the information in this report proves insightful and informs your decision-making process in the coming quarters. If you have any questions, comments or suggestions, please contact us at [email protected].
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CAPITAL INVESTED & DEAL COUNT DEALS BY REGIONS
SEARCH RESULTS
SAVED SEARCHES
Europe League Table 40,672
Funds w/ Dry Powder 12,948
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NEWS & LIBRARY
Katzen Eye Group Goes Varsity
Energy
VCs Doing Better Than Ever
PE Breakdown
European Activity Highlights
2010 Vintage Buyout Funds
Top Exits by Industry
Brightside Acquisition AnaCap’d
Super Uber Round
Meritech Closes $500M Fund
Limited Partners
2,716 LP’s
Limited Partners Name (2,716)# Limited Partner Type # Affiliated Funds
# Affiliated Investors
1
2
3
4
5
6
7
8
9
10
11
12
13
New York State Common Retirement Fund
Pennsylvania State Employee’s Retirement S...Pennsylvania Public School Employee Retire...
Bell Atlantic Master Trust
Teachers Insurance and Annuity Assocation...
Massachusetts Pendon Reserves Investment...
Metropolitan Life Insurance
New York State Teachers Retirement System
Metlife Insurance Company of ConnecticutMassachusetts Mutual Life Insurance Company
China Insurance Company
Public Pension Fund
Public Pension Fund
Public Pension Fund
Corporate Pension
Insurance Company
Public Pension Fund
Insurance CompanyPublic Pension Fund
Insurance Company
Insurance Company
Public Pension Fund
594502
348333
328313
312308
304
274373
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New York State Teachers Retirement System Public Pension Fund 308
Bell Atlantic Master Trust Corporate Pension 333
AUM Private Equity
Private Equity (%) HQ Location HQ Ph
312192
158157
169136
185126
212
163147
Add Column
176,200.00
25,900.00
50,500.00103.35
178.50
59,700.00
516,206.00104,300.00
405,900.00
24,700.00181,980.00
13,919.80
25,900.00
8,040.00103.35
178.50
5,916.00
516,206.007,800.00
405,900.00
24,700.0018,371.00
8%
12%22%17%
42%
12%
7%8%
4.5%
7.3%10%
Albany, NY
Harrisburg, PA
Harrisburg, PA
Basking Ridge, NJ
New York, NY
Boston, MA
New York, NYAlbany, NY
Bloomfield, Ct
Springfield, MA
Quebec, Canada
Layouts:
LP Summary Layout Save Save As
126 104,300.00 7,800.00 8% Albany, NY
157 103.35 103.35 17% Basking Ridge, NJ
COMPANY SIGNALS
LiquidPlanner Seattle, WashingtonBusiness/ Productivity Software... -
Series BLast Inv. Type
May-2014Last Inv. Date
4Investor
Growth RateSize Multiple
45People
$24.32MVal. May 2014
Company Name
The Stiller
Bonobos
Growth Rate
10.2%
19.65%
Size Multiple
1.32K
150K
Total Capital Invested (millions, USD) Deal Count
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2.73xx avg.
76th %ile
115%98th %ile
weekly
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O U R D A T A
PE Fundraising OverviewU.S. PE CAPITAL RAISED VS. INVESTED BY YEAR
FUNDRAISING (#) BY FUND TYPE
As net PE capital figures show, there is an increased sense
of discipline in the PE industry in both dealmaking and fundraising. The asset class remains popular among LPs, as fundraising numbers from last year show and sky-high
Source: PitchBook
distributions only further explain. Yet GPs are more closely aligning fundraising efforts to dealmaking conditions, as the pullback in fundraising numbers over the past few quarters suggests. In addition, the decline in fundraising numbers
this year is also a result of timing; after a few strong years, regression to the mean is inevitable. Capital raised in 2Q reached $32 billion, putting 1H 2015 at $75 billion raised by U.S. PE firms total. Compared to 2013 and 2014 numbers, that is a
FUNDRAISING ($) BY FUND TYPE
Source: PitchBook
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006
2007
2008
2009
2010
2011
2012
2013
2014
1H 1
5 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006
2007
2008
2009
2010
2011
2012
2013
2014
1H 1
5
Buyout PE Growth Co-Investment Restructuring Mezzanine Energy Other
-$800
-$600
-$400
-$200
$0
$200
$400
$600
$800
$1,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15
Net PE Capital ($B) Capital Invested ($B) Capital Raised ($B)
4 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
MEDIAN PE FUND STEP-UP
% OF FUNDS THAT REACH FUND TARGET
Source: PitchBook
Source: PitchBook
With 83% of funds larger than their predecessors and 87% of funds hitting their target in 1H, confidence is strong.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006
2007
2008
2009
2010
2011
2012
2013
2014
1H 1
5
Hit Target Missed Target
60%
83%
65%
31%
21%
42%
30%
38%
41%
35%
84% 86%79%
71%
65%
78%
71%
77% 80%83%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15Median Fund Step-Up % of Funds Larger than Predecessor
relatively more sedate pace, likely a response to current market trends and timing.Deal flow has largely recovered from the financial crisis, yet as competition has increased and valuations risen, despite the ameliorating effects of an active lending market, GPs are adjusting fundraising strategies. More and more funds in the middle and lower ends of the market are being raised and accounting for higher proportions of overall dollars committed. The middle market has been hyped for years—many GPs have responded favorably, embarking on the fundraising trail with funds geared accordingly or redoubling activity if the middle market was their traditional sphere of investment.
LP memories are long; wary of repeating the mistakes of the buyout boom era, they are willing to back funds with a fair degree of risk as long as they remain relatively cost-efficient. The fact 83% of funds in 1H were larger than their predecessors reflects overall confidence in GPs shifting focus toward moderate fundraising goals, while the median fund step-up illustrates a healthy level of caution mixed in with that confidence. More modest fundraising goals is probably why so many funds are still hitting their targets—87% of 1H vehicles hit or exceeded their target size, maintaing the decade high of 2014.
Fundraising numbers going forward are likely to remain stable, especially as GPs refocus on dealmaking in the mid-market. Meanwhile, with LPs still enjoying a flood of distributions from a heady seller’s market, commitments are set to keep streaming into PE coffers.
5 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
PE Fundraising by Fund SizeFund counts for the $100 million and under segment
in 1H were comparable to those of last year, maintaining about 37% of all PE fundraising—that percentage is still a record for the decade, with only 2013 and 2010 coming close to a similar figure. In addition, the number of vehicles closed in the $250 million to $500 million range surged in the first half, on pace to reach numbers similar to 2013 or pre-crisis. As discussed in the prior edition of this report, LPs are still concerned with overpaying for bigger deals, especially in an era of persistently high valuations, unless they are placing their money with a manager that can provide as good a guarantee as PE can give. For example, Blackstone is still raking in commitments for its latest flagship fund—but it’s firms like Blackstone that can command commitments of that nature. Huge pension funds like CalPERS are strengthening ties with PE firms that can provide a fairly stable if not stellar return on the typical huge commitments that LPs in CalPERS’ league make. Yet not all LPs can subscribe to brand-name fund managers. There aren’t that many in the first place, plus the check size required to produce a meaningful return is daunting.
Accordingly, in exchange for a higher return potential, even if it is riskier, LPs are committing more toward the middle of the fundraising market. Capital parked in the $250 million to $500 million range is consequently up to nearly 12% of
PE FUNDRAISING (#) BY FUND SIZE
PE FUNDRAISING ($) BY FUND SIZE
Source: PitchBook
Source: PitchBook
The proportion of funds in the sub-$500 million range is steadily inching toward 80% of all PE fundraising in 2015.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006
2007
2008
2009
2010
2011
2012
2013
2014
1H 1
5
$5B+
$1B-$5B
$500M-$1B
$250M-$500M
$100M-$250M
Under $100M
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006
2007
2008
2009
2010
2011
2012
2013
2014
1H 1
5$5B+
$1B-$5B
$500M-$1B
$250M-$500M
$100M-$250M
Under $100M
6 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
MEDIAN & AVERAGE U.S. PE FUND SIZE ($M)
AVERAGE & MEDIAN U.S. FUND SIZE BY PE FUND TYPE
all dollars raised in 2015. For the $100 million to $250 million size bucket, that percentage is 6.5%, the highest proportion since 2011. Relatively smaller funds may have a higher risk than billion-dollar-plus vehicles, but that risk is offset by the smaller check size needed and the possibility of higher growth for smaller companies, which could translate into an overall higher return.
Median and average fund sizes further support this analysis. In the first half of 2015, median fund sizes hit the lowest level of the decade, a moderate $165 million. The average fund size was down proportionately as well, reflecting a relative lack of mega-funds. If current market conditions persist, it’s likely fundraising in the middle of the market will stay strong through at least the back half of the year.
The continued slide in median and average fund sizes suggests a balance of caution and risk tolerance from LPs.
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15
Buyout $827 $1,151 $989 $914 $623 $556 $613 $873 $791 $439
PE Growth $260 $282 $236 $233 $194 $265 $408 $281 $478 $265
Co-Investment $569 $305 $503 $305 $59 $135 $141 $354 $171 $447
Restructuring $761 $1,365 $2,561 $322 $1,079 $1,177 $1,211 $1,352 $1,805 $1,633
Mezzanine $830 $1,113 $703 $436 $298 $380 $629 $661 $370 $252
Energy $1,289 $946 $799 $2,437 $919 $1,214 $880 $1,171 $662 $2,639
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15
Buyout $300 $295 $271 $212 $280 $200 $205 $215 $230 $144
PE Growth $127 $108 $155 $134 $78 $101 $45 $150 $156 $230
Co-Investment $450 $154 $169 $225 $32 $110 $100 $134 $78 $225
Restructuring $750 $900 $1,550 $179 $346 $753 $918 $593 $1,211 $1,633
Mezzanine $313 $221 $300 $243 $201 $233 $202 $163 $227 $125
Energy $566 $710 $435 $820 $912 $200 $477 $200 $175 $1,930
AVERAGE ($M)
MEDIAN ($M)
Source: PitchBook
Source: PitchBook
$270
$250
$278
$184
$224
$200 $205 $200 $189 $165
$768
$933 $935
$767
$548 $544
$610
$782
$643
$543
$0
$200
$400
$600
$800
$1,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15Median ($M) Average ($M)
7 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
PE Closing TimesThe first half of 2015 witnessed the average time to close funds
decline, dropping to an average of 13.8 months compared to 15.3 months in all of 2014. A few key factors could explain this drop. The total number of funds closed in the period was relatively flat compared with the back half of 2014, yet total capital raised in 1H was down by over 26% compared to 2H 2014. With a noticeable decline in the average and median fund size closed in 1H, more modest fundraising goals help explain the swifter closes. In addition, the time to close may be skewed by which firms are actively raising. The average time between funds in 1H jumped to 5.5 years compared to 4.3 in 2014; that discrepancy indicates there may be a quirk in the data. It’s likely as the year goes on that that figure will decline. Among the GPs that raised in 1H there are likely quite a few that haven’t raised since 2010 or thereabouts, leading to the jump in time between funds. At the same time, those managers are completing raises swiftly, as closing time metrics attest. This suggests that GPs are opportunistically raising while the climate is amenable; the decline in average time between funds since 2010 also supports that supposition. They may also be taking advantage of current sector trends. Energy-focused funds have gained in popularity as of late, raising nearly 68% more capital in 1H than all of 2014 combined. With energy prices declining rapidly over the past year, GPs have been raising rather quickly to capitalize on distressed assets, while LPs have responded just as quickly.
MEDIAN & AVERAGE TIME TO CLOSE
AVERAGE TIME BETWEEN FUNDS (YEARS)
Source: PitchBook
Source: PitchBook
Gather commitments while ye may: GPs that haven’t raised for quite some time are taking advantage of the climate.
13.010.5
12.013.6
20.1
15.214.0 14.9
13.512.8
15.312.9
14.415.3
19.918.9
16.4 16.717.8
13.9
0
5
10
15
20
25
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15
Median (Months) Average (Months)
4.5
4.1
4.0
3.9
4.5
4.5
4.5
4.4
4.3
5.5
0
1
2
3
4
5
6
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15
8 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
PE Capital OverhangU.S. PE CAPITAL OVERHANG ($B) BY YEAR
PE CAPITAL OVERHANG BY VINTAGE YEAR
The PE industry continues to sit on heavily inflated
levels of dry powder, with nearly $534 billion of capital overhang committed to U.S. GPs as of the end of 4Q 2014. That being said, that sum does represent a decline from the massive $553 billion seen in 2013. Last year’s considerable PE activity doubtless helped whittle down that overhang significantly, yet as U.S. activity continues to slide gently down, that may change. Attractive investment opportunities are becoming increasingly difficult to close with strategic acquirers willing to pay hefty multiples to win bids, leaving GPs with plenty of cash to spend but few places to spend it. Fundraising continued to grow between 2010 and the end of 2013; however, capital spent to acquire distressed companies in the wake of the last financial crisis led to a fast-moving seller’s market
in recent years, with new buyouts slowing a bit. Meanwhile, capital from prior vintages has been distributed back to LPs, only to see it recycled back into some of the same GPs, with pensions and institutional investors looking to maintain allocations and replicate past PE returns. This combination of recent fundraising health and increasing competition has led to this steady plateau of overhang.
The landscape could change over the next 12 months, even if drivers of current overhang levels seem to be largely in place for now. It may not be a stretch to see PE activity potentially perk up if public markets were to experience a slide, moving comparable valuations lower and allowing GPs to deploy some of the dry powder they have stacked up. If that is the case, the overhang will decrease again, perhaps by even more than it did between 2013 and 2014.Source: PitchBook
Source: PitchBook
Note: The LP reporting cycle is two quarters behind the most recent quarter ended. PitchBook’s most recent fund returns data is through 4Q 2014, with 1H 15 numbers from vehicles that have begun reporting yet have not fully closed.
$284
$427
$542$515 $503 $481 $497
$518$553 $534
$0
$100
$200
$300
$400
$500
$600
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
1H 15
2014
2013
2012
2011
2010
2009
2008
2007
Cumulative
Overhang by Vintage
5%5%
3%3%
6%
21%
23%
30%
5%
20072008
20092010
2011
2012
2013
2014
1H 15
9 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
Secondaries
SECONDARIES (#) BY FUND SIZE
U.S. SECONDARIES FUNDRAISING BY YEARWhile secondaries have performed well since the
financial crisis, fundraising efforts for secondary investment funds appeared to have slowed a bit immediately following 2009. That being said, the first half of 2015 saw more capital raised for secondary investment vehicles than any other year in entirety since 2009. 1H 2015 saw over $15.5 billion in total capital raised earmarked for secondaries, which is even more impressive given only five vehicles were closed. With private market and public market multiples currently inflated to some degree, secondaries offer LPs risk reduction, as fund managers will look to acquire stakes in vehicles with portfolio companies poised to continue growing in the face of future dynamic markets. With so much capital parked in so few vehicles, LPs are strategically allocating en masse to flagship brands like Lexington Partners to mitigate potentially substantial future blind pool risk. Markets may not soften anytime soon, but the inflation is bound to subside sooner rather than later. In addition, the sell side looks promising going forward as GPs still have a fair amount of aging assets in their portfolios that some are likely looking to unload as hold times creep upwards.
Source: PitchBook
Source: PitchBook
LARGEST OPEN U.S. SECONDARIES FUNDS
Paul Capital
Origami Capital Partners
Capital Dynamics
PineBridge Investments
Paul Capital Partners X
Origami Secondary Fund II
Capital Dynamics Global Secondaries IV
PineBridge Secondary Partners III
INVE S T OR F UND NAME F UND TARGE T ($M)$2,000
$1,000
$500
$500Source: PitchBook
$10
$5 $8 $18
$9 $9 $5 $15
$12
$16
13
6
10
20
13
8
12
16
13
5
0
5
10
15
20
25
$0
$4
$8
$12
$16
$20
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15
Capital Raised ($B) # of Funds Closed
14%
11.8%
42.9%
36.4%
12.5%
23.1%
20.0%
11.8%
27.3%
9.1%
12.5%
15.4%
17.6%
36.4%
28.6%
36.4%
25.0%
7.7%
29.4%
9.1%
14.3%
9.1%
25.0%
15.4%
20.0%
23.5%
27.3%
9.1%
18.8%
38.5%
40.0%
5.9%
20.0%
0% 20% 40% 60% 80% 100%
2009
2010
2011
2012
2013
2014
2015*
Under $100M $100M-$250M $250M-$500M $500M-$1B $1B-$5B $5B+
14.3%
6.3%
10 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
VC Fundraising OverviewU.S. VC RAISED VS. INVESTED ($B) BY YEAR
Booming is an apt adjective to describe the U.S. venture
fundraising scene right now. Even after fundraisers posted a decade high of 262 closes last year with a massive $34 billion in total commitments, the first half of 2015 has seen equally impressive numbers. The $20 billion in commitments already overtopped the entire sum raised in 2013, while the number of funds closed through June’s end is on pace to about match last year’s tally.
Looking at VC invested over the past couple years helps explain this frenzy. Boosted by nontraditional investors participating in massive late-stage financings, net annual venture capital plunged deeper into negative territory YoY between 2012 and 2014. The rush of headlines proclaiming massive valuations has been exhilarating,
especially as a true bubble has yet to manifest, with all the action remaining in the private market. Fundraising numbers
show the extent to which LPs have responded. Venture funds raised by nontraditional players, like Tiger Global, explain part
Source: PitchBook
-$40
-$20
$0
$20
$40
$60
$80
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15
Net Venture Capital ($B) Capital Invested ($B) Capital Raised ($B)
Source: PitchBook
U.S. VC FUNDRAISING BY YEAR
$37
$37
$30
$12
$19
$24
$25
$20
$34
$20
193
177
185
119
151
133
193
187
262
139
0
50
100
150
200
250
300
$0
$5
$10
$15
$20
$25
$30
$35
$40
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15Capital Raised ($B) # of Funds Closed
11 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
Source: PitchBook
Source: PitchBook
% OF FUNDS THAT REACH FUND TARGET
Source: PitchBook
MEDIAN & AVERAGE TIME TO CLOSE
12.0 10.812.6
15.818.7
10.6
13.314.9
13.2
9.9
17.4
13.5
14.5
19.421.8
13.015.1 16.0 16.3
10.5
0
5
10
15
20
25
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15
Median (Months) Average (Months)
0%
20%
40%
60%
80%
100%
2006
2007
2008
2009
2010
2011
2012
2013
2014
1H 1
5
Hit Target Missed Target
VC FIRST-TIME FUNDRAISING
$4.2
$4.0
$3.5
$2.1
$2.2
$2.8
$2.7
$2.5
$3.2
$1.9
59
5152
38
52
49
73
54
101
36
0
20
40
60
80
100
120
$0
$1
$2
$3
$4
$5
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15
Capital Raised ($B) # of Funds Closed
of the surge in capital raised in the past couple years, but looking at some of the VC fund managers currently raising shows that traditional VC players have taken advantage of the good times as well. Intel Capital and Khosla Ventures, to name two, are amassing commitments for funds with target sizes of $2 billion and $1 billion, respectively. While LPs are eager to commit to the asset class—look at median and average closing times, which are both at lows for the decade—VC firms are bolstering their war chests in anticipation of having to hunker down for an eventual downturn, even if that seems unlikely for now. It’s a canny move, especially as money has rarely been this easy to gather. 91% of VC funds in 1H have hit or exceeded their targets, while even first-time funds are raking in plenty of capital. The number of first-time funds closed in 1H may seem low in light of last year’s staggering count of 101, but with 2015 on pace for over 70, that is hardly low.
All in all, the heady promise of unicorns justifying their massive valuations and realizing the commercial potential of revolutionary tech is still contributing to the most favorable fundraising climate in years. The smart money is on the traditional VCs continuing to operate within their normal spheres, avoiding overpaying for massive late-stage rounds and instead of chasing unicorns seeking the even-more elusive dragon—the single investment that returns enough value for an entire fund. But in order to find such creatures, why not rake in the easy money now?
12 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
VC Fundraising by Fund SizeVC FUNDRAISING (#) BY FUND SIZE
VC FUNDRAISING ($) BY FUND SIZE
LP confidence has led to strong fundraising numbers across all size buckets.
Through the end of June, venture fundraising across
all size buckets was quite healthy. In nearly every size range, from sub-$50 million to $1 billion+, fund counts are either on pace or set to exceed last year’s totals. The most noticeable increase in both count and capital raised has been in the $100 million to $250 million bucket: Already in 1H just over $4 billion has been raised across 25 vehicles, in comparison to 36 funds totaling nearly $5 billion in commitments in all of last year. Furthermore, $5.5 billion has already been raised in the next-largest size bucket—$250 million to $500 million—compared to $8.1 billion for all of last year.
Given the overall health of the venture market, these upticks illustrate LP confidence in the asset class, and not just in the middle of the fundraising market. Not only are microfunds—sub-$50 million vehicles—enjoying decade highs by both count and aggregate commitments, but billion-dollar-plus funds are still present, with three closing in 1H alone. We’ve posited the health of those two ends of the market as signaling a bifurcation in strategies, with investors gearing up to stay active in the frenetic angel/seed market as well as the heated late stage scene. Even though VC activity in the U.S. has finally declined by count, valuations and median round sizes show no signs of slowing; consequently, investors seem to be anticipating pricier financings for some time to come and raising accordingly.
This conclusion could seem a bit Source: PitchBook
Source: PitchBook
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006
2007
2008
2009
2010
2011
2012
2013
2014
1H 1
5
$1B+
$500M-$1B
$250M-$500M
$100M-$250M
$50M-$100M
Under $50M
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006
2007
2008
2009
2010
2011
2012
2013
2014
1H 1
5
$1B+
$500M-$1B
$250M-$500M
$100M-$250M
$50M-$100M
Under $50M
13 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
MEDIAN & AVERAGE VC FUND SIZEat odds with the metrics for median and average fund size recorded in 1H, yet the sheer number of venture vehicles closed as of late belies what those numbers actually signify: an impressive display of LP confidence. The proliferation of microfunds alone is the main driver behind the dwindling of the median fund size, although $30 million may well go up as the year goes on if anything. What’s more telling is the step-up in median fund size. After plateauing for the past few years, 1H saw 75% of funds raised exceeding their predecessor in size, hearkening back to the heady days before the financial crisis. The median fund step-up may not seem especially impressive, yet again the number of VC vehicles closed in the first half must be taken into account.
What this entails going forward is hard to pin down. With U.S. venture activity declining slightly as of late, there will likely be a cooling in the market, which could benefit VC investors that have amassed plenty of the money that’s easily available now. But that still appears to be a ways off, as investors certainly have no reason to rein in fundraising efforts while LPs see fit to write huge checks rapidly and valuations remain lofty. For the back half of 2015, it may well be more of the same: continued strong numbers across the fundraising market as a whole.
Source: PitchBook
$100
$127
$86$50 $47 $50
$24
$40
$25
$30
$217$231
$173
$114
$139
$195
$140
$107
$134$147
$0
$50
$100
$150
$200
$250
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15Median ($M) Average ($M)
MEDIAN VC FUND STEP-UP
60%
83%
65%
31%
21%
42%
30%
38%
41%
35%
63.9%
78.8%
63.8%61.8%
48.1%
65.9% 66.7% 66.7%
63.6%
75.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2006 2007 2008 2009 2010 2011 2012 2013 2014 1H 15Median Fund Step-Up % of Funds Larger than Predecessor
Source: PitchBook
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VC OverhangU.S. VENTURE CAPITAL OVERHANG ($B) BY YEAR
The first increase in VC overhang in years occurred
between 2013 and 2014. As the VC scene has boomed over the past few years, so has the fundraising market, producing no less than $28.5 billion in 2014 vintages, a hefty 38% of the total capital overhang. Adding 2013 numbers underlines just how much fresh dry powder investors have on hand: $41.4 billion across the 2013 and 2014 vintages alone, or 54% of the total.
Those numbers imply considerable confidence in plenty of VC activity going forward. That jump between 2013 and 2014 also suggests the importance of nontraditional investors raising huge VC-focused funds. So far, LPs have reason to believe investors will be able to utilize all that capital. Sustained high valuations and massive sums of capital invested
in the first half of 2015 have helped diminish the capital locked in pre-2013 vintages. Even if round counts slow further in the back half of 2015, persistently high valuations will likely reduce that relatively fresh dry powder to manageable levels. Current and future liquidity is a different story, with the dearth of tech IPOs not boding well for older vintages and tech M&A in sufficient numbers still on the horizon. In other words, investors have been able to dispense capital at a healthy clip, but until recent horizon IRRs exhibit improvement, venture returns have not been especially impressive, particularly when considering average fund lifetimes. Perhaps the recent uptick in VC returns will persist—judging by fundraising numbers LPs certainly believe they will—but liquidity to match the fresh overhang will be a tall order.
Source: PitchBook
$89 $93 $91$88
$82$78 $76
$69$76
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2006 2007 2008 2009 2010 2011 2012 2013 2014
1H 15
2014
2013
2012
2011
2010
2009
2008
2007
Cumulative
Overhang by Vintage
Source: PitchBook
Note: The LP reporting cycle is two quarters behind the most recent quarter ended. PitchBook’s most recent fund returns data is through 4Q 2014, with 1H 15 numbers from vehicles that have begun reporting yet have not fully closed.
VC CAPITAL OVERHANG BY VINTAGE YEAR
4%5%
3%
5%
11%
15%
17%
38%
2%
20072008
2009
2010
2011
2012
2013
2014
1H 15
15 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
Largest Open U.S. FundsBUYOUT
The Blackstone Group
Silver Lake
TPG Capital
The Blackstone Group
The Carlyle Group
Lindsay Goldberg
Madison Dearborn Partners
Thomas H. Lee Partners
Blackstone Capital Partners VII
Silver Lake Partners V
TPG Partners VII
Blackstone Tactical Opportunities Fund II
Carlyle Core Private Equity Fund
Lindsay Goldberg IV
Madison Dearborn Capital Partners VII
Thomas H. Lee Equity Partners Fund VII
INVE S T OR F UND NAME F UND TARGE T ($M)
GROWTH
General Atlantic
Jaguar Growth Partners
Sageview Capital
Essex Woodlands
BBH Capital Partners
John Thomas Financial
General Atlantic Investment Partners 2013
Jaguar Growth Partners
Sageview Capital II
Essex Woodlands Health Ventures IX
BBH Capital Partners V
Aeon Multi-Opportunity Fund II
INVE S T OR F UND NAME F UND TARGE T ($M)
VC
Intellectual Ventures Mgmt
Intel Capital
Khosla Ventures
Y Combinator
Sequoia Capital
Duff Ackerman & Goodrich
ePlanet Capital
Pittsford Ventures Mgmt
Coatue Management
Columbia Capital Equity Partners
Formation 8
Geodesic Capital
Invention Investment Fund III
Intel Venture Fund
Khosla Ventures V
Y Combinator Continuity Fund I
Sequoia Capital U.S. Growth Fund VI
DAG Ventures V
ePlanet Ventures II
Pittsford Ventures V
Coatue Management Fund I
Columbia Capital Equity Partners VI
Formation 8 Venture Capital Fund
Geodesic Capital Fund I
INVE S T OR F UND NAME F UND TARGE T ($M)
$17,500
$10,000
$10,000
$8,000
$5,000
$4,000
$4,000
$4,000
$2,000
$1,000
$800
$750
$600
$600
$3,000
$2,000
$1,000
$1,000
$1,000
$500
$500
$500
$500
$425
$400
$400
Source: PitchBook
Source: PitchBook
Source: PitchBook
16 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
MethodologyPRIVATE EQUITY FUNDSThe following fund types are used in PitchBook’s
PE fundraising data: buyout, co-investment,
mezzanine, restructuring/distressed situations,
energy and PE growth/expansion. This report
only includes U.S.-based funds that have held
their final close.
VENTURE CAPITAL FUNDSIn addition to traditional VC funds, PitchBook
also includes corporate VC funds and seed-stage
funds in our VC fundraising total. Funds that
identify themselves as growth-stage vehicles are
classified as PE funds in this report. Only U.S.-
based funds that have held their final close are
included in the fundraising numbers.
CLOSE DATE AND VINTAGEUnless otherwise noted, the fundraising data
in this report is based on a fund’s close date.
The vintage year is based on the vintage year
reported by the GP and LPs, otherwise the year
in which a fund holds its final close is used.
CAPITAL OVERHANGCalculated using the most recently available
fund cashflow data, the capital overhang in this
report is updated through December 31, 2014.
The capital overhang is based on vintage year
and only capital that is held in closed funds
is considered (i.e. evergreen funds are not
counted). If a fund closed on January 1, 2015 or
later, it is only included in the dry powder figure
if it previously held a first close and has cashflow
data available.
FUND LOCATIONA fund’s location is determined by the country or
region where the majority of its investments have
been, or will be, made. Only U.S.-based funds are
included in this report.
17 PITCHBOOK 2H 2015 U.S . PE & VC
FUNDRAISING & CAPITAL OVERHANG REPORT
