The venture capital industry is being squeezed by a growing liquidity crunch, industry sources said.
Even though venture capital firms are awash in capital, the pace of exits is slowing.
The 3Q 2017 PitchBook-NVCA Venture Monitor — released Oct. 10 by the Washington-based National Venture Capital Association and Seattle-based data research firm PitchBook — indicated that if the pace of U.S. venture capital investment holds, 2017 will have the most capital invested in a decade.
By the end of the third quarter, $21.5 billion was invested with more than 1,699 companies, bringing 2017's total so far to $61.4 billion in 5,948 investments.
"If a portfolio company receives a $3 billion investment, can you still call the company a startup? Or is it a public company pretending to be a startup?" asked Dharmesh Thakker, general partner at Menlow Park, Calif.-based venture capital firm Battery Ventures. "Anything more than $100 million should be considered a public company that wants to be private."
But companies are staying private longer than ever before, with most capital tied up in the biggest companies. In the quarter ended Sept. 30, 40% of the $19 billion in venture capital was invested in mega deals — transactions of $100 million or more, according to the MoneyTree Report from PwC and CB Insights.
"That (percentage) is a big chunk compared to any of the other quarters," said Tom Ciccolella, U.S. venture capital leader at PricewaterhouseCoopers LLP.
For the year-earlier quarter, mega deals made up 27% of total quarterly funding.
There were 26 venture capital investments of $100 million or more in the quarter ended Sept. 30 vs. 15 in the year-earlier quarter, MoneyTree data show.