Dow Jones VentureSource: 516 new US venture funds raised since 2013, with 133 in 2016 and 87 so far in 2017; firms raised $44B in 2016, most since dot-com crash
Silicon Valley lures unusual mix of prospectors, despite fears too much money is chasing too few good ideas Tweets: @eliotwb , @steven_norton , @eliotwb , and @mdudas Tweets: Eliot Brown / @eliotwb : New venture funds are sprouting left and right as money pours in. My piece on the hunt for yield, VC version https://www.wsj.com/... pic.twitter.com/imMYYK1cyq Steven Norton / @steven_norton : Money keeps flowing into US venture funds. Celebs, athletes and former startup employees getting in on the game https://www.wsj.com/... Eliot Brown / @eliotwb : Venture Capital: not a great place to make money in aggregate. Even top 25% funds have struggled to beat nasdaq since 2000 https://www.wsj.com/... pic.twitter.com/MmUCyHT0OQ Mike Dudas / @mdudas : “Venture firms raised $44 billion last year, the most since the dot-com boom. The mushrooming of new venture outfits is widely viewed by investors as unsustainable, with too much money chasing too few good business ideas.” http://www.wsj.com/...
Context & Ripple Effects
The fund-formation wave has been building for years: venture fundraising hit $29.8B in 2014, up 69% over 2013 and the strongest year since 2007, then by mid-2017 Dow Jones counted 30 US VC funds of $500M+ raised in a single year, the most since 2000's 54. This piece adds the long tail to that picture — 516 new funds since 2013 — and names who is behind it: celebrities, athletes and former startup employees joining the LP base.
What makes the surge notable is that it persists despite weak underlying returns: per the reporting, even top-quartile funds have struggled to beat the Nasdaq since 2000, and sources view the money influx as unsustainable. The later record confirms the pattern didn't stop here — by 2018 VCs were raising a record number of sub-$100M funds, and by Q2 2021 non-VC investors were in a record 42% of tech startup deals.
First-order effects
- Celebrities, athletes and former startup employees are now direct participants in venture fundraising, widening the LP base beyond institutions just as 133 new funds launched in 2016 alone.
- Established firms face a crowded field: with $44B raised in 2016 — the most since the dot-com crash — every new fund competes for the same limited pool of quality deals.
Second-order effects
- More funds chasing few good ideas bids up entry prices and gives founders more term-sheet options, pressuring incumbents to differentiate on brand and check size rather than access.
- The barbell deepens: mega-funds of $500M+ scale up to lock in allocation while hundreds of small funds proliferate below them, squeezing the middle of the market.
Third-order effects
- If top-quartile funds keep trailing the Nasdaq, the cycle sets up a shakeout where undifferentiated new funds fail to raise successors, concentrating capital among brands with proven track records.
- Venture's broadening investor base — retail-adjacent celebrities now, non-VC funds later — points toward startups becoming a standard allocation in diversified portfolios rather than an insider asset class.
The trend: US venture capital is absorbing a structurally larger and broader pool of outside capital, with fund formation and participation widening faster than the supply of fundable companies can absorb it.