VC Deal Flow and Investing Volume

Every few months here in Atlanta someone brings up the idea that we need more venture money in town. People throw around the idea of another $100 million fund (we have about a half dozen currently) and the resulting capital that will get invested in the region. As a response, I like to point out that capital is more mobile than ever before and that entrepreneurs with traction can easily raise money. In addition to capital being readily available for proven startups, it’s always important to educate people on normal investing volume for VCs, as it is much lower than expected.

Here’s what a typical VC’s deal flow and investing volume looks like per year:

• Meet with 200 entrepreneurs
• Invite 20 to pitch
• Offer term sheets to six
• Invest in two

So, a typical VC only invests in two deals per year. While more local funds are good for a region, the actual number of companies funded will still be limited just by the nature of the business model. The best way to grow a local tech startup community is to produce more modestly-successful companies in a capital-efficient manner that can then go raise institutional money if they so choose.

What else? What are some other thoughts on VC deal flow and investing volume?