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Investments from smart money Venture Capitalists (VCs) in early-stage companies have gradually decreased over the recent past. The decline has been experienced in four out of the past five quarters.

There have been allegations that leading investors in the VC community are pulling out of the early-stage market, which has become a beehive of activities. Generally, there has been an increase in mega projects in the early-stage market. However, smart money VC deal activity in the U.S. early-stage has fallen in four out of the past five quarters.

Venture capital reports show that smart money VC early-stage activity in the U.S. has been falling in the past six quarters. The number of deals fell to 67 in Q3’15 – the lowest since Q4’10 which recorded 64 deals. In general, the deals fell in four out of the past five quarters: Q2’14 – 113, Q3’14 – 98, Q4’14 – 87, Q1’15 – 81, Q2’15 – 85, and Q3’15 – 67.

Are VCs scaling down their early-stage investment activity?



In addition, the average round size of early-stage investments by smart money VCs was analyzed. It was found that the average round size has been on the rise in the last five quarters: Q3’14 – $6.0M, Q4’14 – $6.1M, Q1’15 – $7.6M, Q2’15 – $7.6M, and Q3’15 – $10.4M. The overall increase in average round size could mean that it is increasing in general, or it could also mean that smart money VCs are now participating in bigger deals.

When analyzing the smart money VC early-stage trends, a group of top 20 VC companies was selected for the study. The selection was based on their portfolio estimations and investment returns. The VC companies that took part in the research, listed  in random order: Accel Partners, Index Ventures, Google Ventures, First Round Capital, Felicis Ventures, Union Square Ventures, Charles River Ventures (CRV), Battery Ventures, Andreessen Horowitz, Bessemer Venture Partners, Benchmark Capital, Founders Fund, Floodgate Fund, Spark Capital, Khosla Ventures, Sequoia Capital, New Enterprise Associates, Greylock Partners, Redpoint Ventures, and Kleiner Perkins Caufield & Byers.


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