VC Fundraising Dollars at 16 Year Low

Venture firms aren’t getting much love from institutional investors these days, as just 37 funds were able to raise a fund in the second quarter of this year.

That’s the lowest number of funds to close on a vehicle in one quarter since 1995, according to the National Venture Capital Association and Thomson Reuters (publisher of VCJ).

Adding insult to injury, half the amount of the $2.7 billion raised during Q2 went to Accel Partners. The Palo Alto, Calif.-based firm raised an $875 million growth fund and a $475 million early stage fund in less than two month’s time, according to a release that Accel issued several weeks ago.

U.S. venture capital fundraising during the first half of this year hit $10.2 billion, raised by 76 funds, according to the NVCA. That’s a 67% increase in dollars, compared to the first half of last year. But that’s where the good news ends for most of the industry, because the money was raised by 15% fewer funds in the most recent period.

NVCA President Mark Heesen voiced some alarm in a prepared statement in which he said: “While a smaller venture industry will intuitively produce higher returns, it is critical that the mix of funds remain geographically diverse and cover a broad base of industries if we expect to contribute to economic growth and innovation at the levels we have historically.”

A total of 76 funds raised $10.2 billion from January to June, according to the NVCA. This compares to 90 funds that collected roughly $6.1 billion during the same time period of 2010.

While more dollars were raised, the number of funds out in the market dropped by 15%, which marked the lowest number of funds garnering commitments since the first half of 1995, according to the NVCA.

VCJ online affiliate peHUB polled its readers and asked if this fundraising trend would continue this year. Nearly 34% agreed that fewer funds would raise more money. Another 26.2% believe that fewer funds will raise less money.

One group is more positive; 21.5% of the survey respondents think that more funds will raise more money.

However, the naysayers, or 9.2%, think more funds will raise less money.

The same amount of readers, 9.2%, think there will be no change in fundraising.

—Constance Loizos and Luisa Beltran