Dear Quartz members—
60 years ago, venture capital was a niche industry made up of a handful of small firms in Boston and Silicon Valley. Today, more than 2,000 venture firms manage $1.4 trillion. Everything about the industry has gotten bigger: the funds, the deals, and the valuations.
More startups are being funded, too, though not necessarily as many as you’d think. As Quartz contributor Dave Edwards explains in this week’s field guide, the VC industry invested four times the capital in 2019 compared to 2010, but only invested in twice the number of companies. The amount of funding per company has gone up dramatically, and that creates problems for both the startups themselves and the economy. As companies stay private longer, financial gains are concentrated among a smaller group of investors and companies often lack the oversight and corporate governance that public markets provide.
The next decade promises even more growth for VC, and more change. The industry badly needs to diversify, but progress has been incredibly slow. And new investment models like revenue-based investing could change the way some startups get funded. (If you’re new to this topic, check out Dave’s explainer on how VC firms invest and make money.)
TO DISCUSS WITH FRIENDS OVER DINNER…
- Harvard Business School professor Tom Nicholas argues that VC began in the whaling industry in 19th century New England, which pioneered some of the ways we still finance risky ventures.
- The modern era of VC was ushered in by the Small Business Investment Act of 1958 in the US, which provided low-cost loans to firms that invested in small businesses. The result was many of the VC firms still around today, including Sutter Hill Ventures, Greylock, Venrock, Charles River Ventures (now CRV), Kleiner Perkins, and Sequoia Capital.
- In 2007, the median seed-stage venture investment was about half a million dollars. Last year, it was $2.2 million, according to Pitchbook.
- Just 6.9% of deals and 2.9% of invested capital went to startups with all-women founding teams in 2019.
…OR WITH US, ON FRIDAY, ON THIS CALL
Join Quartz contributor Dave Edwards for a call on the VC boom. He’ll discuss why the industry has grown so quickly, particularly over the past decade, and how in some ways it’s a victim of its own success. And he’ll explain the risks that come with so many large companies staying private for so long.
We’ll be taking questions and comments live on the video conference call, accessible at the usual location.
If you’d like to dial in, use the following numbers:
UK: 0800-014 8469
USA: 866-226 4650
For all of the numbers, the access code is 722 994 440.
You can view or listen to recordings of past calls with members here. And please send a note to members@qz.com if you have any feedback, or suggestions for other things we should cover.
Best wishes for a productive week,
Walter Frick
Membership editor, Quartz