Supply of Venture Capital Funds is High

The National Venture Capital Association reports that venture capital fundraising was at its highest since 2001. So what does this mean?
First, it tells us that there is a lot of idle cash in the economy. And this cash is available in part because other forms of investment are not creating adequate returns. Institutional investors and very wealthy individuals, the most common source of venture capital funding, are no longer seeing high yields in real estate. So more of this money is flowing into venture capital funds.
Second, it tells us that venture capitalists will not be able to be as selective in their investments. Over the past few years VCs have taken much of their funding into later stage deals. Now we will likely see them invest more in earlier stage ventures, and may even see them become less selective in the industries that they are willing to look investing in.
Finally, solid high-potential companies will have a slightly stronger hand during negotiations with VCs. Simple supply and demand tells us that when demand is high (excess money in VC funds), demand will be strong (for good deals). It may now become more of a sellers’ market when it comes to entrepreneurial deals being peddled to the VC “road show” market.