The Changing Structure of the US Venture Capital Market Raises the Bar for Startup Funding

The entry of private equity firms, hedge funds and sovereign wealth funds into venture capital markets since 2008 has dramatically changed venture investment. According to Pitchbook, the average late stage deal size in 2009 was just $12 million—a figure that has tripled since then. In 2009 the average VC fund size was just $122 million; in Q1 2020 the average VC fund raised was $344 million. In first half 2020, PE firms, hedge funds and sovereign wealth funds accounted for 82% of all late stage (pre-IPO) venture investment. With low interest rates prevailing since the money center banks’ destruction of the economy in 2008, this tsunami of tax protected cash looking for low risk, short duration, high return investment has led to bloated valuations, profitless blitz-scaling, reduction of ownership for founders and pressure on traditional VCs to make ever larger investments in early rounds to remain competitive. This seminar explores resulting startup funding challenges and regulatory changes needed to level the playing field.

Brenda Lewis is the owner of Transactions Marketing, Inc. (TMI), (www.transactionsmarketing.com), a 39-year-old venture management firm focused on the launch and funding of enterprise mission critical software, systems and services. TMI owns and operates TechXel Stamford (https:/ / techxelstamford.com/), a B2B tech accelerator. Prior to starting TMI, Brenda spent 15 years in systems and marketing at Exxon International, Marine Management Systems, Inc. and Pechiney Ugine Kuhlman. On a pro bono basis, Brenda is a charter organizer of Kauffman Foundation’s One Million Cups/ Stamford and a judge for the annual Draper Competition for Collegiate Women.