Fund-Raising Pace Slows in Third Quarter

Last week, PE Week reported that venture capital disbursement levels fell between the second and third quarters of 2003. A similar story is now unfolding in the VC fund-raising realm, according to figures released today by Thomson Venture Economics and the National Venture Capital Association.

Between July and September, 19 U.S.-based venture capital firms raised a total of $1.39 billion, which is down 26% from the $1.88 billion raised by 38 venture firms between April and June. Even more startling is the comparison with Q3 2002, when 50 venture shops raised a total of $2.86 billion.

The only silver lining in all this is that a number of large venture capital fund-raising efforts are currently in play, which should significantly boost Q4 fortunes.

New Enterprise Associates, for example, is expecting to hold a first close this month on its $1 billion-targeted eleventh fund. Other firms currently in the market include such marquee names as Charles River Ventures, CMEA Ventures, Novak Biddle Venture Partners, Sevin Rosen Funds and Venrock Associates.

“We didn’t make a single commitment to a venture capital fund last quarter, but will be making some this quarter,” says Diana Zaia, manager of treasury operations for the Woods Hole Oceanographic Institution. “There are a number of opportunities out there right now.”

For some venture firms, however, the fourth quarter and beyond will be a time for writing checks instead of for cashing them.

Of the 19 firms to secure Q3 commitments, six closed out their funds for good. Leading this pack were ComVentures and Lehman Brothers, which each wrapped up $300 million venture vehicles.

The ComVentures fund close was welcome news at the firm’s Palo Alto, Calif. headquarters, which had been sweating out a marketing process that included several notable LP defections. Same goes for New York-based Lehman Brothers, which this past spring lost its managing director in charge of fund marketing.

Other third quarter fund closeout winners included Crosslink Capital with $215 million for its fourth fund and OrbiMed Advisors with $200 million for its Caduceus Private Investment II vehicle.

Strong intermediate closings were held by Alta Partners with $72.4 million on its $250 million-targeted third fund and ARCH Venture Partners, which added $50 million to its $350 million-targeted fifth fund.

For more on the Q3 numbers — including data charts – pick up today’s print edition of Private Equity Week.

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