Could it be the nadir of this recession for the venture capital industry? U.S. venture firms closed the fewest number of funds since the mid-1990s in the second quarter of 2009, according to a study released today. The 63.1-percent decline in quarterly VC fundraising indicated in the study is further evidence that the venture industry is in a tailspin due to the ugly economic conditions.
The study, conducted by Thomson Reuters and the National Venture Capital Association (NVCA), shows that venture firms closed a total of 25 funds during April, May, and June—the fewest since the third quarter of 1996. The actual dollars raised totaled $1.7 billion, the lowest level of VC fundraising in a single quarter since the first quarter of 2003, according to the survey. The NVCA’s survey follows a similar report last week from Dow Jones Private Equity Analyst that shows a 63 percent decline in VC fundraising during the first two quarters of 2009.
These numbers are scary, of course, because venture firms are a main source of capital to fund the commercialization of new technologies and startup businesses. But it’s no surprise to see more proof of the dwindling fortunes of the venture industry. The traditional sources of capital for venture funds—such as endowments, foundations, and pension funds—have scaled back investments in VC firms as their own portfolios take a pounding. Venture firm’s portfolio companies are having trouble finding exits through mergers or acquisition and initial public offerings. And many VCs are said to be delaying their fundraising efforts until the economy begins to pick up, perhaps next year.
“The final manifestations of the bubble burst combined with a troubled exit market make it a very difficult time to raise money,” said Mark Heesen, president of the NVCA, in a statement. “We believe that many venture firms are waiting until 2010 and beyond to go out to their limited partners who, in an improved market, will look more favorably upon the asset class vis-à-vis other alternatives.”
Here are some quick facts from the new study and other observations:
—Venture capital fundraising in the second quarter fell … Next Page »