The supply of venture capital money for 2017 just more than doubled: Saudi Arabia and the Japanese firm SoftBank overnight announced a $100B venture capital fund, based in London, to invest in tech ventures globally.
That's equivalent to the total amount raised by US venture capital funds over the past 2.5 years, CNBC reports, citing NVCA data. What does that mean for venture capitalists and startups? Two things:
First, a firm with a $100B fund to deploy in venture capital markets probably doesn't care too much about price. The volume of the money supply increase alone could send valuations back northward. The West Coast firm Andreessen Horowitz, with more than $4 billion in assets under management, has a reputation for not caring if the price gets bid up in its deals. But most investors are more price conscious. Will they be able to do deals when a flood of new money pushes up the price?
Second, for capital-hungry startups, it will be worth watching where and how the Japanese software company plans to deploy this capital, dubbed the SoftBank Vision Fund. The fund is built on a $25 billion commitment from SoftBank and a $45 billion commitment from the Saudi sovereign wealth fund, both over five years. Who will they hire on the East Coast to source deals?
My partial answer to the first question is, SoftBank's cash floodgate only reinforces the line you've been hearing from a lot of Boston's newly minted "networked" VCs--like G20, Pillar and Underscore--that the money has become a commodity. These firms have each recruited dozens of investors and operators as LPs in their funds. These individual LPs become advisors with an incentive to help their portfolio companies to succeed. If one of those people is someone you want on your board, that firm will be in the deal, and, if you're smart, you may even be willing to take a more reasonable price.
Update: Of course, it isn't bad news for everyone.
@galenmoore huh? More like their deals marked up by a behemoth
— Ric Fulop (@ricfulop) October 14, 2016
