The latest quarter’s venture fund-raising figures were lackluster, to the say the least.
The third quarter money hunt saw 45 U.S.-based venture funds raise $3 billion, according to the National Venture Capital Association (NVCA) and Thomson Reuters (publisher of VCJ). In terms of dollar amount, that was a 40% increase from the second quarter, when 51 firms raised $2.1 billion, and a 29% increase from the third quarter of last year, when 32 firms raised $2.3 billion.
There is little to rejoice when you look back at the historical numbers. For example, U.S.-based venture firms raised $8.4 billion in the third quarter of 2008, the last somewhat normal quarter before the full impact of the economic crisis.
Moreove, the third quarter of this year would have looked far worse without a white knight: a $750 million fund raised by Institutional Venture Partners. The other large VC fund raised during the quarter came from Third Rock Ventures, which rasied $426 million for its second effort.
VCs appear resigned that fund-raising is going to be difficult for some time. “With fund sizes getting smaller and fewer firms raising money, we are experiencing a period of time in which venture capital investment is consistently outpacing fund-raising, creating an industry that will be considerably smaller in the next decade,” NVCA President Mark Heesen said in a prepared statement.
Heesen adds: “[M]ost venture capitalists and their limited partners believe that this environment will drive future returns upward without harming innovation and job creation.”
In the recent quarter, there were 31 follow-on funds and 14 new funds raised for a ratio of 2.2-to-1 of follow-on to new funds. The largest new fund reporting commitments during the third quarter was New York-based Raine Partners, which raised $303.4 million in its inaugural fund, which focuses on life sciences and IT. —Mark Boslet