Oct 10, 2019

Venture capitalists on track for $100 billion in startup investments

Photo: JOSEPH EID / AFP

Venture capitalists are on pace to invest over $100 billion in U.S. startups for the second straight year, including a record number of rounds more than $50 million. This might be the industry's high-volume mark.

The big picture: The dizzying numbers have been driven by an influx of new money that has helped companies stay private longer. But much of that new money comes from what I've previously referred to as "VC tourists" — or investors for whom startups aren't their core competency.

  • These include hedge funds, mutual funds, leveraged buyout firms, etc.
  • Some of this has been institutionalized, in terms of hiring teams.
  • All of it can be quickly abandoned, even in a low-rate environment, if the IPO market stagnates and returns go red. Tourists, after all, eventually head home.
  • One big wildcard is SoftBank, since its theoretical Vision Fund 2 would be larger than most other tourist allocations combined.

Many traditional VC firms also now play in the mega-space, raising dedicated growth equity funds either to make new investments or to support existing portfolio companies.

  • These could have more staying power, but not much more. Venture's history is littered with side-strategies that were dumped in favor of "returning to our knitting."

The bottom line: The new normal could soon give way to the old normal.

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Latino VCs form new group to increase industry representation

Illustration: Lazaro Gamio / Axios

A group of Latino venture capitalists in the Bay Area have formed an organization called LatinX VC to help peers advance or start their careers, raise new venture funds, and connect with limited partners in Latin America.

The big picture: Latinos make up just 1% of the America's venture industry, despite widespread conversation about increasing diversity.

Go deeperArrowOct 11, 2019

Investors sell stocks and hide cash in money market funds

Data: Investment Company Institute; Chart: Andrew Witherspoon/Axios

Investors moved an additional $20.2 billion into money market funds last week, while pulling $13.8 billion out of equity funds, data from the Investment Company Institute shows.

Why it matters: The increased desire for money market funds, which are ostensibly savings accounts, has come as yields on the 10-year Treasury note fell from 2.51% on April 3 to 1.59% on Oct. 2, showing it's fear rather than greed driving fund flows.

Go deeperArrowOct 11, 2019

Hedge funds continue to underperform

Data: eVestment; Table: Axios Visuals

Hedge funds saw overall negative returns for the second month in a row in September and ended the quarter slightly negative, underperforming both the S&P 500 and a fund tracking 50% stocks and 50% bonds from around the globe, per eVestment data released Wednesday.

The big picture: Diversity within hedge funds continued to be a major theme, as fixed income and credit funds delivered positive gains last month, but broad financial derivatives funds returned losses of nearly 4%, dragging down the overall industry figures.

Go deeperArrowOct 10, 2019