Raising a venture fund is never easy, but with limited partners on lockdown, it’s become tantamount to trying to ice-skate uphill.
“I’ve raised six venture funds and the market’s never been tougher,” says Immanuel Thangaraj, a managing director at
That may sound odd coming from a VC whose firm recently announced that it had raised $900 million for its eighth fund. But the truth is that Essex Woodlands had raised the bulk of the fund, or $800 million, last summer. Since then, the stock market has tumbled and the firm abandoned its $1 billion target.
Essex Woodlands isn’t the only firm feeling the pinch. U.S.-based venture firms raised about $4 billion for 31 funds in the first quarter, down 44% from $7.1 billion for 71 funds in Q1 2008, according to preliminary data from Thomson Reuters (publisher of PE Week). Private Equity Analyst reported last week that U.S. venture firms raised $2.4 billion for 23 funds, down 64% from $6.7 billion raised by 57 funds in Q1 2008. Thomson Reuters and the National Venture Capital Association are scheduled to release official Q1 fund-raising data on April 13.
Firms with track records of successful exits seem to be the only ones that were able to swiftly raise money in the current environment—or at least firms with a few funds under their belts.
The largest fund-raiser for the quarter was
The hardest hit venture firms are likely to be the ones without a well-established track record. But at least some investors seem willing to take a measured risk.
The firm has yet to have an exit. So far, Sail has backed interesting and promising companies such as SNTech, a Korean company that is working on a more efficient electric motor, and Enerpulse, a startup that’s making fuel efficient spark plugs.
Fund-raising is slow for everyone right now, but Sail has managed to raise more than $60 million toward a fund that might reach $250 million, according to regulatory filings. And most of the money raised so far came during the first quarter.