In venture capital, a small number of investors generate a large portion of industry returns. We call these “smart money” investors and tracking their activity can provide a window into how venture investing is trending. We used CB Insights data to analyze deal activity among these smart money investors and see how their investment pace has changed.
We define smart money venture capital firms as those firms with the best combination of portfolio valuations and investment outcomes. Our methodology led us to identify 24 venture capital firms (non-micro VC) that stand above the rest in terms of financial success. The full list of VCs analyzed is at the bottom of the post.
When we look at the investing pace of these firms, there’s been a clear slowdown since Q2’15. Compared to a peak in Q2’14, which saw 320 deals from this group of investors.
In the most recent two quarters, deals dropped below 200 for the first time since at least 2013.
The noticeable decline can largely be attributed to a drop in seed deals. Andreessen Horowitz, a large driver of seed deals amongst the smart money investors, dropped from a peak of more than 60 seed deals in 2013 to just 10 in 2016. 2016 saw more participation by smart money VCs in the mid-stage (series B and C rounds), taking more than 40% of deal share, compared to 33% in 2013. 2017 has so far seen more participation in the late stage (series D and E+) including deals into Namely, Proterra, and iZettle.
The drop in seed deals becomes more pronounced when look at the absolute number of deals. Between 2015 and 2016 seed/angel deals dropped by 36%, and Series A dropped by 23%. Series B overtook seed deals between 2015 and 2016, with 2016 seeing Series B deals into Zymergen, Juicero, and Flexport.
Even though smart money VCs are pulling back in deals, they continue to raise more and more money for their funds. These 24 investors raised more than $15B in 2016, more than double the funds raised in 2015. As these investors start getting involved in later stages and larger funding rounds, it’s possible that larger funds are also required. More and more of these VCs are raising opportunity funds as well, which are typically used to invest in follow-on financings. Either way, there is still plenty of dry powder available for these investors.
Note: To analyze smart money trends, we looked at the activity of the top 24 VC firms, selected according to portfolio valuations and investment outcomes. Some of the investors are linked to relevant research briefs. Here’s our full list of 24 smart money investors:
- Sequoia Capital
- Benchmark Capital
- Accel Partners
- Greylock Partners
- Andreessen Horowitz
- Union Square Ventures
- First Round Capital
- Bessemer Venture Partners
- Kleiner Perkins Caufield & Byers
- New Enterprise Associates
- Founders Fund
- Lightspeed Venture Partners
- Foundry Group
- Index Ventures
- Khosla Ventures
- Social Capital
- Emergence Capital Partners
- True Ventures
- Floodgate Fund
- General Catalyst Partners
- Redpoint Ventures
- Spark Capital
- Battery Ventures
Want to track where the smart money is investing? Check out our private market database or sign up below.
This report was created with data from CB Insights’ emerging technology insights platform, which offers clarity into emerging tech and new business strategies through tools like:
- Earnings Transcripts Search Engine & Analytics to get an information edge on competitors’ and incumbents’ strategies
- Patent Analytics to see where innovation is happening next
- Company Mosaic Scores to evaluate startup health, based on our National Science Foundation-backed algorithm
- Business Relationships to quickly see a company’s competitors, partners, and more
- Market Sizing Tools to visualize market growth and spot the next big opportunity