Small Venture Funds Thrive and Multiply Amid Mega-Fund Dominance
Despite the venture capital industry's tilt toward massive mega-funds, smaller U.S. funds raising under $100 million reach record numbers in 2018. These micro and nano funds target early-stage deals without directly competing for the same institutional capital as their larger counterparts.
The venture capital landscape experiences a massive shift as entrenched firms raise ever-larger funds to accommodate startups that delay going public. This trend allows the biggest venture funds to capture a supermajority of all capital called down from limited partners, leaving a smaller percentage of the overall fundraising pie for newer players.
Despite this top-heavy dynamic, small-dollar venture funds continue to multiply at a rapid pace. U.S.-based general partners raise more sub-$100 million venture funds in 2018 than in any previous year, with both "micro" and "nano" size classes exhibiting strong and similar growth patterns over time.
These featherweight funds, particularly those categorized as "nano VC" raising $25 million or less, focus primarily on pre-seed, seed, and Series A deals. They avoid direct competition with mega-funds by not pursuing the same institutional capital or sovereign wealth money, allowing this thriving subset of the market to soar on existing market thermals.