Overhang Is Shrinking

Justin Hibbard

VentureOne released its latest overhang survey today. Overhang sounds like a painful toenail condition, but it's actually the amount of uninvested capital that's idling in VCs' kitties. Two years ago, everybody was nervous about the overhang because VCs had raised so much lucre in the foamy days and then practically stopped investing it. In response, lots of firms cut fund sizes (if they hadn't already spent the management fees). Now the overhang is waning and "will continue to decline," says VentureOne analyst Matt Garlick. However, VCs are still sitting on a sizable lump of un-invested follow-on capital (money that they plow into their portfolio companies in subsequent fundraising rounds). That partly explains why late-stage valuations have been rising.

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