VCs Sit on a 'Record Pile' of Uninvested Capital

A new report from Colliers on venture capital offers that while VC investment is slowing as could be expected, “investors are sitting on a record pile of uninvested capital—$290 billion—the vast majority of which was raised in 2021 and 2022,” suggesting strong future investment.

Volume of investments in the first half of the year were down 12% from 2021’s record-setting pace. But still, investment volumes “remain well ahead of historical norms.”

“Despite the pullback over 2021, year-to-date investment has already nearly matched full-year 2020 levels,” said Aaron Jodka, director of research, U.S. capital markets for Colliers, in an emailed remark from the company. “Further, Q3 funding is trending to be in line with the 2017–19 quarterly average of nearly $40 billion.”

And VCs, by the nature of their business, and demands from the limited partners investors, can’t sit on that money indefinitely. To get returns, the money has to be in play.

While the life sciences sector frequently receives attention, other sectors—telecom, media, technology, software as a service, fintech, AI and machine learning, mobile and more—receive larger VC investment totals. All “will be important drivers for office and industrial absorption, while creating jobs and fueling retail spending and housing demand,” the report said.

There was a big jump of investment that went to real estate-focused tech: 26% of global funding, according to a July 2022 VC funding report from the Center for Real Estate Technology & Innovation (CRETI).

“Venture capital investments in private real estate technology companies outperformed the global venture capital market,” CRETI wrote. “In H1 2022, $13.1 billion was invested in real estate technology companies, including commercial, construction, residential, industrial, and other real estate sectors.” That was up 5.65% from the first half of 2021, even as the stock market, and especially the tech side, took a deep dive in a cold lake.

“There is no denying that VC investment is a key driver of commercial real estate demand,” said the Colliers analysis. “As companies grow, they need physical space.”

While that money is eventually good news for commercial real estate, not everyplace will benefit. VCs focus their U.S. investment in California, New York, and Massachusetts. Other states see investment dollars as well, but not to the same extent.