Here at Crunchbase News, we write about a lot of funding rounds and the investors leading them. Most of the time, those investors tend to be venture capitalists, but a growing number have been private equity firms.
Subscribe to the Crunchbase Daily
I’ve seen the names of private equity firms pop up in some of the funding rounds I’ve covered, but I started thinking about it more after attending a dinner hosted by IVP earlier this month. Sandy Miller, a general partner at the firm, was talking about trends in the 2019 late-stage and IPO market, and noted that this year brought a diverse set of companies making exits and private equity firms investing less like they traditionally used to. He also predicted that in the future we’d see private equity firms as more active players as acquirers.
Private equity firms have traditionally invested in established companies that need capital and reorganization so that they can be sold at a profit. They typically take larger stakes in companies than venture capital firms do, and their investments are seen as less risky because they’re putting their money toward established businesses. But over the past few years, we’ve seen more private equity firms as the lead investor in venture capital funding rounds.
Crunchbase News has written about the differences between venture capital and private equity before, but as we noted, the lines between the two are becoming more and more blurred. So we pulled the data to see how private equity investing in the VC world had changed.
Looking over the past decade, the number of VC rounds for U.S.-based companies that were led by private equity firms has more than quadrupled. In 2009, 105 VC rounds for American companies were led by investment firms tagged “private equity” in the Crunchbase dataset, compared to 470 rounds so far this year.
The number of VC rounds in the U.S. led by private equity firms has been steadily increasing over the past 10 years, and it’s a trend that also applies to VC rounds worldwide, according to Crunchbase. Although 2019 saw highs for VC rounds led by private equity firms, 2018 was actually the peak year, with private equity firms leading 532 rounds for U.S.-based companies and 1,429 rounds worldwide.
These numbers represent a relatively narrow set of the totals. For example, as of Dec. 26, there were 6,866 reported venture rounds in 2019. That means that just under 7 percent of venture rounds had a private equity-tagged investor as the lead.
But still, the numbers are rising and though 2019 saw a small dip, private equity firms leading VC rounds is going strong.
The data in this article was sourced by Crunchbase News from Crunchbase data. We started with the set of investors which are tagged as “private equity funds” and identified the rounds each of these firms led. We deduplicated the list of funding rounds (because it’s sometimes the case that multiple firms will co-lead a round), selected only the round types we collectively call “venture” rounds, and plotted deal volume over time. More information about the types of rounds that Crunchbase News includes can be found on the Methodology page on this website.
Note that private company financing data is subject to known reporting delays. These reporting delays are more likely to affect seed and early-stage deals. Reporting delays may be responsible for the dip in deal volume seen in the 2019 column in the chart.
Illustration Credit: Li-Anne Dias