Fundraising Tide Remains Low for Venture Capital Firms

10/8/09Follow @bvbigelow

Fundraising by U.S. venture capital firms continues to lag. A survey released overnight by Dow Jones Private Equity Analyst shows that 26 VC funds raised about $3.5 billion during the three months that ended September 30—down about 51 percent from the same quarter last year.

The findings nevertheless represented an improvement over the previous quarter, when VC fundraising was down by almost two-thirds compared with the second quarter of 2008. While fundraising was down for all types of VC firms over the past three months, those that invest in late-stage startups were hit hardest.

In a statement, Jennifer Rossa, the managing editor who oversees the survey, says, “The venture industry hasn’t been able to escape the turmoil affecting the rest of private equity. But brand-name firms and emerging managers with strong stories are still able to raise capital.”

The survey noted that Khosla Ventures was the biggest closer, raising $1.06 billion for a pair of funds that are focused mostly on cleantech investments. Star power also may have helped Andreessen Horowitz, the venture firm launched by Netscape founder Marc Andreessen, raise $300 million from limited partners that typically include college endowments, pension funds, and other institutional investors. The survey also noted the $500 million raised by Domain Associates, which specializes in life sciences investments, was short of the firm’s $700 million goal.

So far this year, 83 funds have raised $8 billion, or 42 percent of the $18.9 billion that 141 VC firms raised during the first nine months of 2008. The survey reported that all private equity firms, including VC funds, have raised $79.9 billion in 265 funds so far this year—a 59 percent decline from the same period last year.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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