Jim Cook analyzes the recent fund raising data from VC Valley - some great insights:

"The VC market is getting healthy again. VentureWire reported today that $6 Billion of new funds were raised by VC's in Q2 2005 (that's outside investors (Limited Partners) giving money to VC firms so they can invest in startups at some later time). For perspective, $2.5B of this was raised by only 3 firms (Menlo, August Capital, and NorthBridge). This $6B quarterly number puts CY 2005 on pace for VC's raising nearly $25 Billion of capital that they can invest in their respective startup portfolio's.

I don't believe the media does a good job of giving perspective to VC data. So let's give it a shot by comparing how much was raised vs how much the VC's have invested historically in their startup portfolio's.

Reviewing PWC's Money Tree Datawe find the following VC funding history (VC's investing in startups) for the last 10 years. In 1995, there was $7 Billion invested. 1996 = $11B; 1997 = $15B; 1998 = $21B; 1999 = $54B (beg of the bubble); 2000 = $105B (bubble); 2001 = $41B (post-bubble); 2002 = $21B; 2003 = $19B; 2004 = $21B; 2005 ~ $25B (estimate). I couldn't get the graph to work out for the X/Y Scale but all you need to know in the picture below is the gridlines are every $20B (Y scale) while each dot represents a year (1995-2005).

In terms of #'s of Companies funded over the last 10 years, the data looks like this.
1995 = 1800
1996 = 2500
1997 = 3100
1998 = 3600
1999 = 5400
2000 = 7800
2001 = 4500
2002 = 3000
2003 = 2900
2004 = 2900
2005 = 3100 (estimate)

Other interesting consistent historical insights from this data:

• 30% of all U.S. VC Backed Companies are funded in Silicon Valley. This grows to 45% if you include all of the West Coast (Southern Cal, Seattle Area, etc)
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• Other than the bubble period, 200-250 companies get funded every quarter in Silicon Valley. We are on pace for 900-1000 companies funded in CY 2005. My gut says this is a function of # of VC's and # of partners and time/focus.
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• The average investment (dollars / # of companies) per VC funding is a rather tight range of $8.5M-$9.0M per company funded. Again, an average. This compares to pre-bubble funding amounts of $5-$6 million vs the peak bubble days of $16-$17 million per funding. I'm looking for this number to increase over the coming quarters as exits today are more visible and getting bigger faster is once again in vogue."
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