For startups, VC funding is always in season

For startups, VC funding is always in season
From TechCrunch - July 26, 2017

Weve entered thedog daysof summer. For many, that means time on the beach, backyard barbecues and, if youre like us, seeking out the blissful respite afforded by a solid air conditioning system.

In the land ofstartups and venture capital, however, summer can mean something a bit different.

Today, were tackling theconventional wisdomthat investors tendto slow down during these months.Its a revisit of apiecewe wrote last year, but this time, weve added a bit of a twist. Rather than just focusing on the seasonal investing behavior of venture capitalists, we also examine how investors in venture capital firmstypically referred to as limited partners, or LPs for shortmake their investments throughout the year. In doing so, well track both when venture capitalists raise their own funds and when they deploy them.

For bothstartup founders and VCs raising money, well start first with sharing our findings before getting into the methodology and conclusions.

Founders can raise whenever they want to

Foundersin the United Statescan rest easy knowing that theyll be able to raise money whenever they need to. At least these days, summer isnt the dead zone its purported to be. Although there are slight variations in funding throughout the year, there really isnt a particularly favorable season for closing rounds.*

In other words, any time is a good time to raise money.

In the chart below, weve plotted the distribution of six years worth of venture capital deals struck with U.S.-based companies throughout the year. Note that the Y axis represents the percent of deals struck in a given month, and that, if there were a truly even distribution of deal-making throughout the year, all bars would be at the same height: 8.33 percent (equal to 100 percent divided by 12 months of the year).

Although there are slight bumps in activity during the first and last months of the year, there is a slight, arcing curve that seems to crest around June before tapering off throughout the rest of the year. This aligns with our findings from last year.

However, despite this seemingly tidy trend line, the actual data is anything but tidy. Below, youll see the data for each of the six years we analyzed and averaged out:

VC funds start at the beginning (of the year)

Although startups can successfully raise money throughout the year, the same cant be said for venture capital funds. There is a yearly window during which the folks who start and lead VC fundsreferred to as General Partners or GPsseem to raise their funds.

VC funds seem to follow the advice of the King from Alice in Wonderland: Begin at the beginning. There appears to be a seasonal aspect to fund start datesa plurality of which fall in the first quarter of the year.

Why is some fundraising seasonal (or not)?

Charting Methodology


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