The FINANCIAL — NEW YORK (October 10, 2011) — Venture capital fund-raising was cut in half after the 2008 recession and has yet to rebound in both the U.S. and Europe.
According to new statistics from Dow Jones LP Source, 32 U.S. venture funds raised $2.2 billion during the third quarter, a 24% drop from the same period last year when 40 funds raised $2.9 billion. Through the first three quarters of the year, U.S. venture fund-raising was up 9% but more than half of the $10.6 billion collected for 90 funds was committed during the first quarter.
In Europe, venture capital fund-raising is on pace to set another record low as 25 funds garnered $1.8 billion during the first three quarters, a 31% drop in capital committed from the same period in 2010. In the third quarter, four funds raised $424 million.
“As limited partners continue to show a strong preference for investing with only the most prominent firms, the number of funds and the amount of capital committed have shrunk,” said Scott Austin, editor of Dow Jones VentureWire. “If this trend continues, entrepreneurs will face greater competition for capital and other investors, such as angels and corporations, may find opportunities to invest in deals that, traditionally, would have been done by venture firms.”
U.S. Early-Stage Funds Suffer as LPs Lean Toward Multi-Stage Strategies
In the U.S., limited partners continued to favor multi-stage strategies and shy away from early-stage funds. Early-stage fund-raising dropped 41% as 52 funds collected $2.1 billion in the first three quarters. Multi-stage fund-raising was on par with the same period last year as $5 billion was committed to 28 funds.
Ten late-stage funds raised $3.5 billion during the first three quarters, more than triple the $1.1 billion raised for 8 funds a year ago.
European LPs Focus on Early-Stage Funds
After closing $125 million for three early-stage funds during the third quarter, the total raised for European venture funds during the first nine months was $1.2 billion for 18 funds, a 14% decline in capital committed compared to the same period a year ago. Multi-stage funds fared worse as seven funds raised $585 million in the first three quarters, a 47% drop in capital committed over the same period last year.
Discussion about this post