Charting Form Ds to roughly see the state of venture capital “fund” raising | Hacker News Reader

Charting Form Ds to roughly see the state of venture capital “fund” raising

tj401.com

167 pointslemonlym75 comments

I'm in an adjacent space so quite interesting to me. Couple of concerns:

1) This Fund+Roman Numeral notation is universal among funds. Meaning this data isn't VC. It's use of fund structures. Real estate, PE, private credit maybe bit of hedge funds etc...and yes also VC.

2) Filling trends are affected by jurisdiction fashions so to speak. One of the big fund jurisdiction makes a small rule tweak and everything pivots there. Or away. The funds we're setting up today are structured differently and in different jurisdictions than 2 years ago. Same for regional focus. Think about what that does to a single jurisdiction trend analysis like this.

3) The spike coincides pretty neatly with covid, lockdown and that sudden injection of cash trillions into the financial system. So a spike in fund entities registered makes sense. Haven't looked at who got those trillions, but I'd wager it was bigger institutions not young VC operations starting their first fund.

Still the core hypothesis seems sound for funds overall. Regardless of type a lot of these funds will indeed be on a 2-4 year investment period. So it does broadly check out that there might be a softening of funding supply coming up.

Great points! Obviously this analysis is not unconfounded as the methodology is pretty scrappy.

On point 3, I think both large and small investment groups saw large growth. This is lightly supported by the spike in filings related to SPV as a service companies like Angellist.

I am in this space. Most funds don’t have “fund” in the name. (And VCs have, anecdotally, tended to use Arabic over Roman numerals, the latter being the domain of PE and RE.) Also, there is multiple counting with this method because you will have collections of GPs, funds, SPVs, co-invests, feeders, et cetera, all with the same fund + [Roman numeral] format.

What you may be measuring is the formation of naïve funds. And yes, anecdotally, we saw a lot of novice managers emerge in '21 and '22. (Many of whom are now winding down.) But that doesn't mean they're concentrated in VC. In my experience, RE and--novelly--crypto, lead the charge.

If you want to prosecute this question, better data will be found in Pitchbook and the VCFA.

Agree with your broader point but have the stupidest point to persecute (arabic vs roman numerals) -- anecdotally seeing a lot of our investor base raise their next funds (all VCs) they have all been roman numeral named for some reason. Is this an east coast vs west coast thing or is it just a luck of the draw thing

1) Form D provides a classification response that indicates if the vehicle is a VC fund. Seems like a good fix here.

2) jurisdiction won’t matter if it’s offered into the U.S. it needs to file a Form D (or rely on other exemptions).

Bubbles are largely a function of finance, not tech; if there is a lot of easy money available, it wants somewhere to go, and any tech will do (recall XML startups...).

Interest rates are one of the biggest factors, because of how they create indirect pressure on cash availability (which is the whole point of raising interest rates).

Everyone is bracing for tariff recession as well, which may cause a lot of investment capital flight.

Bracing for tariffs starting two years ago?

what tariffs started two years ago? And how might those compare to the current tariffs being threatened/pulled/enabled in the past few months?

You misinterpreted my comment.

I wanted to know what an "XML startup" was so I googled the term and the first result that seems relevant was actually this exact comment lol. I guess this is a phrase of your own invention?

That seemed amazing to me because it would’ve meant Google found the comment, integrated it into thier index, and then made that index available, all within three hours. I know Google is good but are they that good?

I googled “xml startup business example” their AI summarized an “xml startup” as “a business using XML as a core technology” and gave the business below as an example startup.

https://databridgesolutions.io/

I didn’t see any reference to the hacker news comment.

Most of the links google provided below the AI summary were about how to configure various XML tools to… startup. Standard link farm stuff. :)

I routinely see Google indexed HN comments within one or two hours of posting so not at all surprised by this.

EDIT: In fact I see your comment as the 5th result or so searching "XML Startup" in quotes haha.

How interesting. I also tried “XML Startup” with and without personalization and got nothing from hacker news on the first three pages of links. I had no idea there was so much variance on returned results.

Google is usually pretty on top of fast-changing sources like HN. My mind was blown more when I saw that ChatGPT seemed to ingest and regurgitate an HN comment of mine as an answer within 10-15 minutes of my posting (see the thread in https://news.ycombinator.com/item?id=42649774). Sadly this is no longer verifiable as the answer does not match my comment, but at least it correctly answers the original request, which it did not prior to my response.

It was definitely a thing during the dot com bubble. It was just so stupid that most probably don't talk about it much nowadays to be indexed. You'd need to somehow restrict your search history to pre 2002

I swear it was a thing

But I find this terribly funny, so, thanks

As someone else mentioned just looking Fund+Number doesn't exclude non-VC funds. However, the 2024 NVCA report supports the OP's thesis: see page 17: https://nvca.org/wp-content/uploads/2024/05/2024-NVCA-Yearbo...

That graph doesn't perfectly match the OP's but is definitely close enough to be worrying if you were raising or looking to join a startup

Most Fund I’s are going to be smaller funds, often $9.99MM to allow for a larger number of smaller LPs due to the $10MM threshold from the SEC. Whereas Fund II-IV are going to be considerably bigger, often hundreds of millions of dollars. So a large number of smaller funds falling off won’t make that big of a dent in the total dollars available, but may make it harder to get the smaller initial checks.

What could a fund like this even write checks for? Even the most basic SaaS companies are getting multiple of the entire fund as seed or pre-seed...

Typically $250K-500K checks as a follow on. From what I'm seeing, lots of companies are still out there raising sub-$3M pre-seeds and sub-$10M seed rounds. You might only get 1-2% of the company but you can always try to buy up in later rounds through an SPV or your next fund, which can be a marketing strategy for raising fund 2.

The most basic SaaS companies are not raising $10MM at pre-seed, they’re raising $1-3MM at $10-30MM post.

The threshold is actually $12M now! There are some proposals floating around to actually change it to $50M with a 500 LP cap

https://www.congress.gov/bill/119th-congress/house-bill/4431

Oh nice! That's probably reasonable, although I am pro keeping the accredited investor requirement.

I think everyone knew, even without looking at any data, that startups were in a bubble thanks to Covid, when every "shoeshine boy" was studying to be a webdev at a start-up.

Like how many food delivery apps that are actually profitable can the economy handle?

I think the real real giveaway is that like 90% there's a big exit, it's an aquihire and the "product" is quickly dumped.

Yep. Many / most aquihires are pretty ugly financially. While the headline sounds impressive (“X startup acquired for $250M”) the reality is that with preferred cap tables and terms most folks see nothing and investors are merely trying to recoup some losses or make a modest (less than S&P500 index fund return) return on investment. It’s basically a fire sale to salvage what’s left from the wreckage.

Founders might get a little something and most shareholder employees get nothing.

Don’t they usually get a better stock package than the average new hire?

In my experience what the founders usually get is a bigger locked up retention package. The investors want the cash, and the acquirer wants the founders to stay.

The employees along for the ride on an acquihire? Sometimes yes, sometimes no. Depends a lot on how generous the founder/target of the acquihire is.

The problem is usually not "there are 300 food delivery services" but "there are three food delivery services and they control the market".

It's restaurants that don't want to deal with 300 apps. They will pick the top 3 and call it a day.

.. and that's also a problem.

It's a business model problem; The "Uber" business model relies on a monopoly.

The business model is 1) "Have artificially low prices to push all competing business into bankrupty", 2) "Now that we're a monopoly, raise prices massively", 3) Massive profit, so long as no government starts doing anything about the fact that both steps #1 and #2 are illegal.

That business model fails the moment you have multiple startups dumping the market, none can move to step #2 because they'd bleed all their users to whichever competitor is still in step #1.

Not that it would drastically change the conclusions, but do the numbers for "fund i" include the forms that say "fund ii" etc (by virtue of the fact that "fund i" is a substring of "fund ii" etc)?

It doesn't look like it does since "fund I" >> "fund II"

As we'd expect if the numbers for "fund I" include both "fund I[^I]" and "fund II"?

You were actually right. I went and checked to see that some (not all) values were double counted. I've updated the graph to reflect this, and added a note. The trend remains identical, despite this change. Thanks for inspiring me to double check.

VCs were literally pitching to startups to take their money during the pandemic (there were several articles about that at the time). That nonsense will now come home to roost as companies that took money at those hyper-inflated valuations will now need to face reality.

LPs that let their money get tied up in such nonsense are also about to head into a world of pain. I fear the present AI bubble will only exacerbate the pain as both sets of bad investment decisions come crashing down around the same time.

>VCs were literally pitching to startups to take their money

LMAO, true. A "friend" from that space was making money introducing VCs to "entrepreneurs", lol. He was fully booked!

Geeze, I had a product with real users and a path to monetisation and I got ignored… is it because I was in Europe?

Yes

> and I got ignored

Socializing our losses here, aren’t we? If it works out you did it, if it doesn’t, it’s the others that didn’t see the value :)

Hah, fair enough! Also you’re more likely to hear about startups that get funded vs not.

In part it'll be Europe, though VC in the "throw money into a fire" style does/did exist.

But VCs, especially in those days, bordered on antipathy for sensible business plans. They didn't want small businesses that would turn profitable quickly and grow sustainably. They wanted something with infinite growth ASAP that they could pump-and-dump on Big Tech or IPO suckers.

I had some VCs try and pitch me on joining a few companies as an advisor. When I didn't bite they pivoted to me just making a company. "What idea" I asked. "I'm sure you have some good ones, let us know." They said. "Money is cheap right now, ideas aren't".

I doubt they'd return my call today.

Money was so cheap then, I remember a VC fund which would match ideas to founders and get them to success because of how versatile and multifaceted the VC team was. :D

>"Money is cheap right now, ideas aren't"

Decades of programmers scoffing at the "idea man" with his new app idea and now this...

(I don't think this would change the overall message of the analysis), but one reason why the "Fund I" bump might be so pronounced compared to other reports is because of the "SPV as a service" data that was hinted at in the takeaways.

It's very common for these single-asset SPVs to be titled, "[Abbreviation] Fund I" -- but these aren't really the same type of "Fund I" as a multi-security venture fund run by a professional manager.

E.g.: (1) These are entities that are sort of arbitrarily titled "Fund I" as part of a template naming convention, but there's not as much of a direct expectation that they'll have a corresponding Fund II, III, etc. (2) Whether they do is more of a function of the underlying portfolio company raising a subsequent financing and giving the same SPV manager an allocation (which small time SPV managers often don't get pro rata for), rather than the fund manager's ability to raise a subsequent blind pool fund II.

One hack to find a lot of these SPV as a service filings is to search "a series of". They do have a formulaic filing process, but from looking into it, adding "fund I" is not part of that. It usually does indicate that its the first syndicate of the parent promoter, but they don't do it for every filing. Here is a search query where you can kind of see the variance: https://www.sec.gov/edgar/search/#/q=a%2520series%2520of&cat...

Yeah I think basically all the ones here with letter/number combos are SPVs. (A lot of the time, they're actually the first two letters of the portfolio company -- would be cool to attempt analysis there!)

https://www.sec.gov/edgar/search/#/q=Fund%2520I%252C%2520a%2...

Interesting to see how Form D filings track shifts in fundraising activity. From our experience, founders are also adapting their pitch deck narratives depending on whether capital is flowing or tight. It’s fascinating how much presentation strategy mirrors these macro trends.

It is a concern that this could simply reflect changing naming conventions for private funds. There is nothing that requires a fund to use the "Fund I" convention.

Would it be possible to confirm the trend using Form ADV instead of Form D filings?

Form ADV is the form used to register an investment advisor, which is fundamentally different than disclosing a fundraising event. It could definitely be interested to look into. The SEC presents its data in a relatively simple format. Here is the link for Form ADV historical filing data: https://www.sec.gov/foia-services/frequently-requested-docum...

I just wanted to follow up and say I was confidently wrong previously. Thanks for posting, and for the idea.

This is pretty cool for a simple analysis. Would love to see v2 with some of the suggestions others have made regarding filtering, catching SPVs or non-“fund” etc.

Can you query based on exemption used?

Good, many bad companies will release good developers to work on more productive things. It's healthy for everyone.

This assumes that these startups had good developers.

Maybe healthy, but will likely depress developer salaries even more.

That assumes the good developers can find work. May not be so healthy for all of them.

i'm an early-stage vc - the author's analysis on "number of funds" (specifically VC funds) is accurate. the overall volume of venture allocation has also slowed considerably if not decreased (which is totally expected in a higher interest rate environment).

2021-2022 was a total blip on the screen zero interest rate era thing.

i'm not seeing considerable slowing of new startup development, quite the opposite actually w/ AI. this is for a few reasons:

- accelerators are filling the gap; the accelerator model is actually quite efficient in the early-stage spectrum (it needs some further innovation). there are a huge number of AI accelerators and programs now; and further

- most of the capital going into VC is just being further concentrated into the large Multistage firms like A16Z, Accel, Sequoia, General Catalyst, etc... all of these firms are realizing they need to win deals as early as possible so have multiple seed programs: accelerators, incubations, scouts, fund-of-fund allocation, geographic funds, university focused sub funds, etc...

- overall great founders & startups are truly just exceptional so statistically there just won't ever be that many. venture will always be a cottage industry of sorts. in this form - "venture" equates with "growth"; there can only be 1 category leader by definition and venture is meant to capture this. 2021-2022 overall venture market was too big.

- AI is making startup creation many multiples more efficient. we saw this w/ the advent of the cloud, where startups used to need $2-3M "to buy servers" and 2-3 years to ship a product in 2010, by 2015-2020, they really only needed $3-500k to get a product to market. we're going to see that number come down considerably (unsure if it will be 30-50k, but definitely a lot lower).

- we're also seeing the new wave of the 10-person unicorn (billion $ company); these companies will raise a lot less cash, so will result in higher multiples on the original investment.

- i think the overall distribution of returns will look different on a portfolio basis in 2025-onwards. with power law, we expect to see super long-tail concentration on the 1-2 companies that yield 99% of the return to a portfolio, but i suspect we'll start to see some mitigation of that effect with more companies yielding positive outcomes. this might mean that there's less of a reliance on portfolio construction to generate risk-adjusted returns and that there could be more of a democratization of early-stage investing where we see 10-100x the number of startups and founders. that warrants a longer analysis, but as someone just bullish on startups and everyone being a founder that possibility is very exciting to me.

With so much money flowing into the massive funds, do you think more and more unicorn startups will just stay private? It seems like there are liquidity opportunities for employees/founders via tender offers, secondaries, etc.

If you are a profitable unicorn who can raise money in the private markets when needed, is there really a benefit to going public? Maybe I am missing something, but going public doesn't really seem to be as important as it used to be.

Not to be too ageist but the author appears to be a Stanford college student? Interesting thoughts but also feels kind of naive in that it is using a lot of assumption of a logical market, which is kind of adorable in a world where investing has devolved into a hype gambling market where Tesla has become a meme stock.

On the topic of "logical markets", it's not so much how logical a market is and more how much liquidity and available funds exist in the market. It doesn't matter if the market is logical or not, if there is a relative scarcity of funds there is bound to be a contraction.

Perhaps financing is also dropping off because COGS is near zero now. Anyone with a vibe-coding LLM, some basic knowledge to correct the code, and a bit of common sense product management can launch a product. OpEx is cheap and aligned to usage. Gold age for builders.

Not many successful vibe coded products

Are there any? Concretely. Genuinely curious.

People dont really state their product has been vibe coded. Also % vibe coded is a spectrum. I feel pretty confident in saying I could knock out a PoC in a day now by virtue of code assist. It still requires work, but not VC $.

Not many products built in a day have any value

Oof that title. Particularly when the site design is so substantive!

I've edited it to use what I think is representative language from the article itself. (This is to allow it to spend more time on HN's frontpage, because the article itself deserves it.)

Hey, thanks for this! Prompted me to take a look at the HN guidelines :).

> Otherwise please use the original title, unless it is misleading or linkbait; don't editorialize.

You seem to be editorializing because of your bias and financial interest in YC. "No one is talking about" is an idiom you allow onto the front page relatively frequently (check Algolia), and you allow speculation pointing up for industry trends.

The key word in your post is "seem". Not possible to argue against that! But we can look at data here, at least:

> "No one is talking about" is an idiom you allow onto the front page relatively frequently

I just went through all cases of this since April 2014, when we started logging these things. During that time, only two such titles spent more than an hour on HN's front page.

In one of those two cases, we edited the title to make it less baity: A tech antitrust problem no one is talking about: US broadband providers - https://news.ycombinator.com/item?id=24967472 - Nov 2020. (Submitted title was "The tech antitrust problem no one is talking about".)

You have to go back to June 2015 to find a "no one is talking about" which spent more than an hour on HN's frontpage without getting mod-edited: How for-profit prisons have become the biggest lobby no one is talking about - https://news.ycombinator.com/item?id=9749393 - June 2015. (Still not sure how I would edit that one.)

In all other cases, mods either edited out "no one is talking about", or users flagged it off the front page so quickly that mods probably never saw it. That happened 3 times, btw; here they are if anyone is curious:

The Internet's Time Is Flawed–Why No One Is Talking About It - https://news.ycombinator.com/item?id=43054616 - Feb 2025 (23 minutes on the frontpage)

Browser Permissions on Android: What No One Is Talking About - https://news.ycombinator.com/item?id=23556055 - June 2020 (38 minutes on the frontpage)

The Crisis No One Is Talking About - https://news.ycombinator.com/item?id=17175969 - May 2018 (14 minutes on the frontpage)

Over this time period (i.e. since April 2014), users submitted 4.3M articles to HN. Of those, 392k appeared on the front page. Everyone can decide for themselves what counts as "relatively frequent", but to my mind, 1 or 2 cases (or 5 if you really want to stretch it) out of 392k titles over 11 years doesn't clear that bar.

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