At RAISE 2020, Joanna Drake hosted an informative discussion with fund-formation attorneys from Cooley—John Dado, Eric Doherty and Jimmy Matteucci—about the impact of the global pandemic on fundraising and new fund formation.

Discussion points:

• The pace and structure of fund formation activity in 2020
• The pipeline for additional formation activity
• Terms being offered to anchor investors and more

Takeaways:

• The pace of fundraising in 2020 was expected to fall but instead was "record-breaking." In 2019, Cooley worked with 300 VC firms that closed funds. By August 2020, 225 funds had already closed. Unlike other years, there was lots of liquidity in the market and firms may have been trying to get a transaction done before the presidential election. 
• Regarding fundraising duration in general, the “won and done” close was less prevalent than the “rolling closing” (multiple closings) fund formation—possibly due to market dynamics (again) and LPs taking longer to commit. ‍
• LPs were more reticent to move largely in part to the market dip in early 2020 with the wider outbreak of the pandemic. Closings that were 6-12 months on average may now take closer to 18 months to final closing 
• LPs are making sure pricing is as good as they can get which may extend time to close. On the other hand, other LPs jumped in quickly and more aggressively to get a more favorable position in an emerging fund. 
• While many funds have raised recently and capital has come through, but the industry has gotten larger. One reason is some fund managers are breaking out on their own in new areas. 

Watch the entire discussion on Cooley’s website. And request an invitation to RAISE Global Summit 2021.

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Disclaimer

The Tipping Point Series (“Tipping Point”) is a collection of interviews with fund managers who (a) have previously raised a venture capital fund and (b) are providing advice and insights into the formation and management of venture capital funds (the “Presentations”).  Tipping Point is not an offer to sell or a solicitation of an offer to buy any security issued by any venture capital fund, including without limitation, any venture capital fund managed by Tipping Point’s speakers, presenters, or producers. 

The Presentations do not (a) provide investment advice with respect to any security or (b) make any claim as to the past, current, or future performance of any security or venture capital fund, and Tipping Point expressly disclaims the use of the Presentations for such purposes.  The Presentations are not intended to constitute legal, tax, accounting, or other advice or an investment recommendation. Prospective fund managers should consult their own advisors about such matters with regard to their venture capital funds.  Raising a venture capital fund involves significant risk of loss of income and capital, including loss of the full amount raised and invested, which may occur as a result of identified or unidentified risks.

Tipping Point is produced by Raise Conferences, LLC (“Raise”).  Raise is a private invite-only venture capital conference, which provides a forum for venture capital funds to network with and present to potential venture capital investors.  Although Raise produces Tipping Point, the Presentations are independent of Raise’s conference and do not provide any forum for the Tipping Point speakers, presenters, or producers to solicit the sale of any securities. ‍