Raising Entrepreneurial Capital by Erickson Suzanne M. Vinturella John B. & Suzanne M. Erickson

Author:Erickson, Suzanne M., Vinturella, John B. & Suzanne M. Erickson
Language: eng
Format: epub
ISBN: 9780124017283
Publisher: Elsevier Science
Published: 2013-01-20T16:00:00+00:00

Figure 6.1 Venture capital investments by year. Source: NVCA.org.

Table 6.1

Venture Capital Investments by Year

Source: PricewaterhouseCoopers/NVCA MoneyTree™ Report, Data: Thomson Reuters.

Table 6.1 measures volume by the number of new funds raised each year, as well as total dollars invested. Interestingly, the average deal size has remained relatively constant between 2004 and 2011, the period bracketing the Great Recession. Venture capital investing is intimately tied to what is happening in the stock market. To induce investors to part with their money, there must be a high likelihood of exit within a 3- to 8-year time period. If the stock market is unreceptive to IPOs due to increased risk aversion, an uncertain economy, or any other factor, that exit strategy becomes less likely and venture capitalists become reluctant to invest in the first place.

VCs generally raise investment capital from pension funds, endowments, foundations, insurance companies, banks, and high-net-worth individuals. Many angel investors also invest through venture capital funds. Since the rule change in 1979, pension funds have become the dominant supplier of capital to the venture capital industry. Although any individual institution will typically allocate only 2–3% of its capital to venture capital, over half of all money received by venture capital funds is supplied by pension funds.

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