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Venture Capital Fundraising Activity Slows Considerably in 1Q2009

National Venture Capital Association (NVCA) and Thomson Reuters

April 2009
 

Just 40 venture capital funds raised US$4.3 billion in the first quarter of 2009, according to Thomson Reuters and the National Venture Capital Association (NVCA). This level represented the smallest number of venture funds raising money in a single quarter since the third quarter of 2003. Dollars commitments however, reflected a slight increase over the previous quarter when US$3.5 billion was raised.

“The first quarter fundraising data suggests two distinct dynamics currently taking place during the economic downturn,” said Mark Heesen, president of the NVCA. “First, the majority of venture firms are not actively fundraising at this time because they have either recently raised a fund and are investing those dollars, or are waiting until market conditions improve. Second, despite the recession, venture firms with solid track records continue to be able to secure sizable commitments from limited partners as there remains a great deal of promise for future returns from the venture capital asset class.”

Table 1: Fundraising by Venture Funds

Year/Quarter

No of Funds

Venture Capital
($ million)

2004

211

19,156.0

2005

236

28,747.5

2006

239

31,866.0

2007

249

35,649.4

2008

214

28,278.5

2009

40

4,316.0

1Q2007

81

6,485.5

2Q2007

85

8,660.6

3Q2007

77

8,595.8

4Q2007

85

11,907.5

1Q2008

71

7,120.1

2Q2008

78

9,246.7

3Q2008

62

8,393.3

4Q2008

47

3,518.4

1Q2009

40

4,316.0

Source: Thomson Reuters & National Venture Capital Association

Market circumstances nearly halted the formation of new venture capital funds in the first quarter of 2009. Just three new funds and 37 follow-on funds were raised in the first quarter, or a ratio of over 12 : 1 of follow-on to new funds, compared to 6 : 1 in the first quarter of 2008. A “new” fund is defined as the first fund at a newly established firm, although the general partner of that firm may have previous experience investing in venture capital.

Table 2: VC Funds – New vs Follow-on

Year/Quarter

No of New

No of follow-on

Total

2004

55

156

211

2005

63

173

236

2006

55

184

239

2007

61

188

249

2008

47

167

214

2009

3

37

40

1Q2007

21

60

81

2Q2007

17

68

85

3Q2007

15

62

77

4Q2007

26

59

85

1Q2008

10

61

71

2Q2008

23

55

78

3Q2008

13

49

62

4Q2008

11

36

47

1Q2009

3

37

40

Source: Thomson Reuters & National Venture Capital Association

The largest fund raised in the first quarter was August Capital V LP (balanced stage, US$650 million) by firm August Capital Management followed by Bain Capital Venture Fund 2009 LP (balanced stage, US$475 million) by Bain Capital Ventures.

 

 

The National Venture Capital Association (NVCA) represents approximately 450 venture capital firms in the US. NVCA's mission is to foster greater understanding of the importance of venture capital to the US economy, and support entrepreneurial activity and innovation. The NVCA represents the public policy interests of the venture capital community, strives to maintain high professional standards, provides reliable industry data, sponsors professional development, and facilitates interaction among its members. For more information about the NVCA, please visit www.nvca.org.

 

Thomson Reuters is the world’s leading source of intelligent information for businesses and professionals. Thomson Reuters combine industry expertise with innovative technology to deliver critical information to leading decision-makers in the financial, legal, tax and accounting, scientific, healthcare and media markets, powered by the world’s most trusted news organisation. Thomson Reuters is headquartered in New York and employs more than 50,000 people worldwide. For more information, please visit www.thomsonreuters.com.



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