Economic worries are having an impact on venture capitalists seeking to raise money with fewer firms raising larger rounds.
A mere 55 funds were closed in the third quarter. That’s the lowest total by far over the past three years, according to statistics from the and Thomson Reuters. The previous low was 68 in the third quarter of 2006.
However, the firms involved raised $8.1 billion, which was only $400 million less than raised in the same time frame a year earlier.
“The third quarter fundraising statistics reflect the already anticipated trend that is likely to be pervasive in the coming year – fewer firms raising larger funds,” said Mark Heesen, the NVCA’s president.
“Many firms with proven track records will be raising funds in excess of $500 million to invest in longer term, capital intensive industries such as life sciences and clean technology,” he added. “These firms will drive up the average fund sizes. And despite the turbulence in the financial markets, top tier venture firms will continue to be successful in their fundraising endeavors as there remains a strong pool of innovative companies looking for funding.”
Silicon Valley VC giant Sequoia Capital led the money raising with a $929.5 million fund, Austin Ventures ranked second at $900 million. InterWest Partners placed third with a $650 million fund focused on early-stage investments.
Of the funds that closed, only 10 were new ones. That total ties the lowest quarterly total in three years, matching the number in the first quarter of this year.
“The ratio of follow-on to new funds approached 5-to-1 in the third quarter of 2008, compared to 4-to-1 in the third quarter of 2007,” Heesen said.
The NVCA defines a new fund as the first raised by a newly established VC firm.
Year to date, 178 funds totaling $24.3 billion have been reported. In 2007, 250 funds generated $36.1 billion, That total represented the best fund-raising year since 2003.