NEW YORK – There are few financial transgressions more serious than failing to live up to market expectations. Of course, if no expectations are ever set, then a market’s performance can not really be judged a disappointment.
Such is the case of the venture capital industry during the fourth quarter of last year. During a period in which elected officials warned of a looming recession, e-tailers missed out on another Christmas season full of opportunities and a prominent venture fund declined $1 billion worth of limited partner commitments, it should come as no surprise that less money was raised by VC firms than in any quarter since the third quarter of 1999.
According to revised figures from Venture Capital Journal publisher Venture Economics, 119 venture firms raised only $16.5 billion during the fourth quarter of 2000. That compares very unfavorably with the 191 firms that raised $29.6 billion over the same three months in 1999. Moreover, it is also a steep decline from the $27.8 billion and $27.4 billion raised in second and third quarters of 2000, respectively.
St. Paul Venture Capital VI led the pack, with a $1.3 billion mega-fund. Others joining the $1 billion-plus venture club included Accenture Technology Ventures and Lightspeed Venture Partners.
A pair of other firms – Summit Ventures and Charles River Ventures raised a majority of their recent mega-funds in 2000, but actually sealed their respective deals in 2001. Summit raised $2.1 billion, while Charles River announced last month it secured $1.2 billion, despite raising its carried interest fee from 25% to 30%.
“It’s unfortunate that the Nasdaq has dropped so much, but our investors remained bullish on our early-stage model,” said Dave Power, a partner with Charles River.
Indeed, 50 of the funds raised are classified by Venture Economics as early-stage, while 46 were balanced-stage and just 13 were later-stage. Nine seed-stage and 3 expansion-stage vehicles were also raised.
All tolled, 491 firms raised funds in 2000, bringing in approximately $93.4 billion.
The largest of the bunch was Warburg Pincus International Partners with $2.5 billion. Following up Warburg were New Enterprise Associates with and TA Associates, each with $2 billion funds.