The amount of funding dedicated to early stage technology has ballooned over the last two decades (Statista). While statistics of the funding volume flowing into startups are being published on a regular basis very few data is being released on the number of individual firms behind that funding. In this post we use Crunchbase's database to deep dive into the number of Venture Capital and Private Equity firms operating in the market and we analyze how this number has grown over the last two decades.
It is interesting to see that there are 27,108 VC firms listed as active and that this number has grown by a staggering 5.6x over the last two decades. This numbers have been obtained from Crunchbase's database by filtering out the firms classified as "closed", i.e. not active anymore. The definition of VC used for this analysis excludes individual investors such as Business Angels, which are the largest group by number with 53,827, but includes Corporate Venture Capital and Family Offices with direct investments besides traditional Venture Capital firms and MicroVCs. Notably, the US is the largest market by share with approximately 40% of the Venture Capital firms being established there. This share has remained approximately stable over the years.
Another interesting result is the number of newly added firms per year. On average, every year 1,300 net new Venture Capital Firms have come to the market. This is a net addition number, i.e. number of closed has already been substracted. Also notably, 40% of the newly created firms are established in the US. I would have expected that share to diminish over time but it has largely remained stable since 2001.
The challenging fundraising environment can clearly be seen in the data as well. Since January 2022 a significant slowdown in the newly created firms can be observed: 526 new VC firms in 2022 and only 185 in 2023.
The number of PE firms is approximately half the number of VCs. Interestingly, this ratio has changed over time because the number of Venture Capital firms has grown faster than their Private Equity counterparts (5.6x growth for VCs and 4.2x for PEs). In the year 2000 there were 2 PEs for every 3 VCs. Today there is 1 PE for every 2 VCs.
The steady increase in Venture Capital and Private Equity firms over the last two decades has compounded to a very significant number today: 39,590 firms. From my conversations with GPs I still sometimes get the impression that the insiders have not yet realized how big and how competitive the Venture Capital industry has become. This is particularly the case for VCs since PE firms have been operating under competitive dynamics for longer and they are somewhat used to it. If this trend continues, which seems to be the case despite the market slowdown, the number of VC and PE firms could double in the coming decade reaching 80,000 firms worldwide.
Guillem Sague
CEO of CarriedAI