Dana Mead: Historical Growth of Venture Capital

So if you just step back and I use these dates, 1980 and 2006, to really talk about how the venture capital industry has changed dramatically. So if you look in 1980, there was approximately 100 venture capital firms and approximately 1,000 venture capitalists in the country. By 2006, it's basically tenfold. And just look at the amount of capital that was raised in those two years in 1980. 2.1 billion and almost $30 billion in 2006. And then it's the amount of total venture capital money under management, $235 billion in 2006. So it went from a very small boutique industry to an asset class. And how did that happen? It was really driven by university endowments and two in particular, Stanford here with Mike McCaffrey and Yale with Dave Swinson. And what they saw was they said, and they wrote books about this, they said in your portfolio of assets that you manage, which would include equities, real estate funds, private equity, et cetera, you need to have part of that allocation in venture capital. Now, it wasn't a big allocation, it was 2 to 3%, but they said you needed to have venture capital. And so those endowments, pension funds, et cetera, then came and said, look, we want to get in venture capital. And that was really what drove the growth of the industry. So if you look at the industry from a geography, and these are 2008 data, but they haven't changed very much at all of the mix. So in this year, we're on track to have about $28 billion in investment, so very similar to this mix. And if you look at the mix of investment, it's very similar to these data. So information technology, software is still the biggest area. Life sciences is the second, with biotech being a little bit larger than devices. And then you can see green tech basically came out of nowhere in the mid 2000s, but now stays about 4 to 5 billion dollars a year of VC investment. Another interesting thing, if you're interested in venture capital, starting companies, California obviously is a great place to be. And about half of that venture capital is invested every year in California. And we'll talk about why that's the case. And you can see some of the other markets. I often travel around the country, and everyone wants to recreate what we have in Research Triangle. Boston, San Diego, Minnesota area, the Northwest, are all interested in gathering and gaining some of these investment dollars.