In news that will not come as a shock to anyone who was remotely plugged in to the venture capital market in 2001, fund-raising figures dipped to new lows in the fourth quarter.
|Quarter||No. of Funds||Amount Raised|
|The figures above show funds raised only by U.S.-based VC firms. They do not include buyout and mezzanine vehicles.|
|Source: Venture Economics/NVCA|
According to figures released today by Venture Economics and the National Venture Capital Association, venture capital funds managed to bring in just $4.6 billion in commitments during the last three months of 2001. That’s a notable decline from the $6.9 billion raised during Q3, and an even steeper drop-off from the $11.7 billion raised in Q2.
The slowdown is not surprising, given that VCs had been extremely active in the fund-raising arena during most of 2000 and early 2001. Indeed, 605 VC firms raised funds in 2000, pulling in approximately $104.6 billion. They remained fairly active through the first two quarters of 2001, as $29.1 billion was raised in that six-month time frame.
Moreover, the pace of investing has slowed considerably from that of 2000, meaning VCs don’t feel the need to raise funds nearly as quickly or frequently as they did before.
Despite the sharp downturn in Q4, however, 2001 was the third-busiest year on record for venture fund raising. Still, the numbers don’t belie the significant slump the venture market felt last year. All told, venture firms raised just $40.6 billion, less than half the amount raised in 2000.
Perhaps indicative of the trouble many first-time funds are experiencing after the bursting of the dotcom bubble, just $4.6 billion, or 11% of the total dollars raised in 2001, was committed to first-time funds. That compares unfavorably with 2000, when one out of every four funds was new, but is in line with figures from 1999, when first-time funds gained 13% of the $59.2 billion raised that year.
Although early- and seed-stage funds took the lion’s share of the funds raised in Q4 – with $2.4 billion in commitments, they captured more than half of the total amount raised for the quarter – they received just $24.3 billion for the year, down 58% from the $58 billion raised in 2000. Balanced-stage funds came in second, with 83 funds in that category bringing in $11.4 billion. Comparatively, 196 balanced-stage funds pulled in $33.8 billion in 2000.
For the year, six funds raised $1 billion or more, compared with 21 in 2000. North Bridge Venture Partners and Oak Investment Partners tied for the first-place spot, each raising a $1.6 billion vehicle. Austin Ventures followed right behind with a $1.5 billion fund, and Morgenthaler Ventures was close on its heels with a $1.4 billion investment vehicle.
Robyn Kurdek can be contacted at: Robyn.Kurdek@tfn.com
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