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The fundraising drought continued into the third quarter of this year. Venture funds worldwide raised a combined $76.3 billion from Q1 to Q3, down 45 percent from $139.4 billion in the same period in 2022, according to Venture Capital Journal research. The number of funds holding final closes was also down, dropping from 910 in the first nine months of 2022 to 432 in the first nine months of this year.
Q3 was also the worst quarter of the year for the amount of capital raised by venture firms, at just $18.2 billion, compared to $31.4 billion in Q2 and $26.7 billion in Q1. On a positive note, the third quarter saw the largest number of venture funds get closed this year. A total of 177 funds closed in Q3, up from just 88 in Q2 and 167 in Q1.
Average fund size comes down
An increase in the number of funds closing in Q3 helped to bring down the size of the average fund. For the first nine months of this year, the average venture fund was about $190 million, down from nearly $211 million in 2022. However, the average fund size is still significantly larger than it was in 2021 and 2020, at $146 million and $129 million, respectively.
Europe gains ground
North America continued to be the favorite region for newly closed funds in the first nine months of this year, but it isn’t as popular as it was last year. Of the total capital raised, 46 percent was earmarked for North America, down from 52 percent in 2022. The biggest gainer was Europe, which went from 6 percent in 2022 to 12 percent as of Q3. Multiregional funds also showed improvement, going from 25 percent in 2022 to 28 percent as of Q3. Fundraising for vehicles targeting Asia remained challenging due to political tension between China and the US, but there was some improvement over the previous quarter. As of the end of Q3, 12 percent of the capital raised is for Asian countries, up from 10 percent as of Q2.
Not giving up
The tight market appears to be taking its toll on fundraisers. Funds in market were targeting a combined $249.4 billion as of October 13, down from $272 billion on July 12. Venture vehicles focused on North America are seeking the largest amount, nearly $117 billion, or 47 percent of the total. Funds targeting the Asia-Pacific are targeting $57.3 billion (23 percent), while those with a multiregional focus are seeking $49.7 billion (20 percent) and funds focused on Europe are trying to raise $19.5 billion (8 percent).
Inside the top 10
Of the 10 largest funds raised this year, seven are $1 billion or larger. Of the group, just one is focused on Europe, the Nato Innovation Fund, which has raised $1.1 billion, and one is focused on Asia-Pacific, Qiming Venture Partners RMB Fund VII, which has raised $900 million. And in a sign of the popularity of investing in the environment, there is one climate fund in the top 10, Galvanize Innovation & Expansion Fund I, which has raised $1 billion. New Enterprise Associates is the year’s largest fundraiser by a large margin, raising more than $6 billion over two funds: NEA 18 Venture Growth Equity ($3.2 billion) and New Enterprise Associates 18 ($3 billion).