Venture capital contraction and consolidation is becoming apparent as second quarter dollar commitments to U.S. firms totaled $2.9 billion, down 54 percent compared to the same period a year ago.
The $2.9 billion was raised for 44 funds, according to an analysis by Thomson Reuters and the National Venture Capital Association. It marks the lowest quarter for venture capital fundraising in dollars since the third quarter of 2011.
The Reuters/NVCA report follows a report last week from alternative asset research firm Preqin that found that second quarter global VC investment was down year over year in both total dollars and the number of deals. Preqin reported 1,135 venture capital financings in the quarter totaling $10.4 billion. In the second quarter of 2012, Preqin data show 1,249 VC financings totaling $10.9 billion.
NVCA President Mark Heesen said that the second quarter data reflects consolidation in the venture capital industry as well as the overall contraction of fund size.
“Many long-standing, pedigree venture firms are heeding the guidance from limited partners and raising smaller, more agile funds,” Heesen said in a statement. “Consequently, dollar values of capital under management are declining from historical levels.”
Heesen added that the uptick in initial public stock offerings from venture-backed companies could lead to more investment dollars coming into venture capital.
The top five venture capital funds accounted for 55 percent of total fundraising during the second quarter of 2013, according to the Reuters/NVCA report. Massachusetts-based Matrix Partners X, L.P. led venture capital fundraising in the quarter raising $450.0 million. California-based Scale Venture Partners IV, L.P. raised $300.0 million. Foundation Capital VII, L.P. raised $282.0 million.
The second quarter saw 29 follow-on funds and 15 new funds; the number of new funds raised during the second quarter was more than double the number of first-time funds raised during the first quarter of this year, which the Reuters/NVCA study says was atypically low.
By dollars raised, follow-on funds accounted for 89 percent of total dollar commitments during the second quarter. Over the past five years, follow-on fund dollars have accounted for 91 percent of total venture capital fundraising.
The largest new fund reporting commitments in the second quarter was Massachusetts-based Sigma Prime Partners IX, L.P. which raised $115.6 million for the firm’s inaugural fund.
