Venture Capital Industry Profile

The US venture capital industry includes about 800 active firms that invest about $23 billion annually, according to Ernst & Young. Major VC firms include Accel Partners, Draper Fisher Jurvetson, Kleiner Perkins Caufield & Byers, Matrix Partners, and Sequoia Capital. The industry is fragmented: the top 50 firms invest about one-third of venture capital dollars.

Globally, venture capital firms invest about $32 billion annually. Major firms based outside the US include Amadeus Capital Partners (UK), Globis Capital Partners (Japan), Jerusalem Venture Partners (Israel), and Nexus Venture Partners (India).

COMPETITIVE LANDSCAPE

Demand is driven primarily by the pace of technological innovation and the number of companies created to commercialize new technologies. The profitability of individual companies depends on successfully choosing and managing a portfolio of investments. Large companies have advantages in attracting investors, developing expertise in multiple technology markets, and funding large deals. Small companies can compete effectively by concentrating on specific market sectors or geographic areas.

Individual, or angel, investors, and large companies with strategic interests in early-stage companies are also sources of new venture funding.

PRODUCTS, OPERATIONS & TECHNOLOGY

Venture capital companies provide money to young, rapidly growing companies with promising new products or services in exchange for ownership in the company. Major market sectors for venture capital investments include software; life sciences (including biotechnology and medical devices); telecommunications; media and entertainment; and clean tech (energy and environmental technologies).

Venture capitalists (VCs) create pools of money, or funds, ...