VC Fund-Raising: Wait ‘Til Next Year

Venture capital fund-raising hit a 15-year low last quarter, according to data released this morning by the National Venture Capital Association and Thomson Reuters (publisher of peHUB).

Just 17 U.S.-based funds raised $1.6 billion, which is the puniest display since Q3 1994 — when 17 funds raised $938 million. I guess VCs could take a bit of solice that the most recent batch raised more capital per fund than did the 1994 crew, but that really would be damning with faint praise.

VC firms had raised $1.96 billion for 27 funds in Q2 2009, and $8.5 billion for 63 funds in Q3 2008.

The quarter’s top fund-raiser was Khosla Ventures, which secured $750 million for its third fund. The only other three firms to raise over $100 million during Q3 were Draper Fisher Jurvetson, Domain Associates and Longworth Venture Partners.

Much of the fund-raising lethargy can be chalked up to LP liquidity troubles, which has caused most cash-hungry VC firms to postpone fund-raising until 2010. There will be a few Q4 exceptions — both Greylock and Highland Capital Partners should hold closes — but LPs are gearing up for a busy Q1.

The counter, however, will be that industry-wide, 10-year returns will fall off a cliff come January 1, once 1999-vintage returns disappear. That won’t scare off too many long-time VC investors, but could dissuade new institutions from signing up.

You can get more detailed data at the NVCA’s website.