Just 17 venture capital funds raised money in the recently completed third quarter. It was a pace slower than any quarter since 1994.
But there are signs of change ahead. “We are hearing that fundraising activity is accelerating as more firms that were waiting for economic recovery are beginning to formally seek commitments,” says National Venture Capital Association President Mark Heesen.
Heesen said he expects fundraising to remain at low levels for the rest of the year. But in 2010, increases will gradually show up.
The challenge for general partners is that many of the limited partners who fund venture firms are rethinking their long-term strategies in the wake of last year’s financial crisis, he said in a study of the third quarter results. The fundraising process has slowed down.
Ironically, given the slow investment environment, it probably doesn’t matter right now how much money VCs take in. It is not moving out the door at an accelerated pace.
However, long-term the industry will need to replenish its bank accounts. That’s when the question of money raising will become critical, especially given the financial demands of clean tech and biotech companies.
During the third quarter, VCs raised just $1.6 billion, down from $8.5 billion in last year’s third quarter.
