Fewer venture capital firms raised larger rounds of funding in the first quarter compared with the same time frame in 2006 and 2007, the National Venture Capital Association and Thomson financial reported Monday.
A total of 57 firms raised $6.26 billion compared with 83 funds and $6.21 billion in 2007 and 75 funds and $6.59 billion in 2006.
Mark Heesen, the NVCA president and a keynote speaker later this week at the Council for Entrepreneurial Development’s annual venture conference, said the need for capital is helping drive up the overall size of funds.
“The interest by venture capitalists in capital intensive industries such as life sciences and clean technologies will likely drive fund sizes upward for the foreseeable future,” Heesen said.
“The long-term investment horizon coupled with the dollars required to bring those companies from the garage or lab to the marketplace will compel venture capital firms to raise larger funds or accelerate their fundraising cycle to sustain these promising companies.”
Of the capital raised, 29 early-stage firms closed on $2.8 billion. Twenty-three firms that focus on a range of funding opportunities pulled in $3.2 billion.
Venture firms had their best year of fundraising in 2007 since the dot-com bubble crash, with $35.9 billion being raised. Because so many firms raised money last year, Heesen said, “Fundraising activity may actually slow in 2008.”
However, Heesen added, the overall investment climate is good, noting that “there is no shortage of opportunities nor is there a shortage of institutional investors interested in participating in the venture capital asset class.”