Join NexChange - the professional
network for the financial services
industry - and receive a free one-
year subscription to Forbes
VCs tech investments trump exits for the first time in years
Investors are now pumping more money into US startups than they are getting back in the form of exits.
According to a report by CBInsights, total funding for this year has reached $42 billion, about $16 billion more than the $26 billion generated through exits.
What's more, the VC investment total for the year to date has already surpassed that of 2014, and is more than double that of the 2010. Exits meanwhile are less than a fifth of what they were in 2012.
Fluctuations in exits and investments are to be expected over a long period. VC investments typically have a 5-year lifespan, while the fund life-cycle is anywhere between 8-10 years.
Many of the VC funds making exits and returning capital to investors during 2012 have since returned to the market with follow-on funds. This means a lot of those VCs exiting investments in 2012 have raised and are spending the next three to four years deploying capital.
That said, there are other trends to consider. Companies are staying private longer and funding rounds are getting larger, pushing up private market valuations. The upshot is that the funding aggregate is exceeding exit valuations faster -- even if we witness a number of large liquidity events in the fourth quarter.
Photo: Indigo Skies