VENTURE CAPITAL INDUSTRY RAISES $1.72 BILLION IN Q3 2011

Lowest Dollar Amount Raised Since Q3 2003

Fifty-two U.S. venture capital funds raised $1.72 billion in the third quarter of 2011, according to Thomson Reuters and the National Venture Capital Association (NVCA). This level marks a 53 percent decrease by dollar commitments and a 4 percent decline by number of funds compared to the third quarter of 2010, which saw 53 funds raise $3.5 billion during the period. U.S. venture capital fundraising during the first nine months of 2011 totaled $12.2 billion from 146 funds, a 26 percent increase by dollars compared to the nine months of 2010 and an 11 percent increase by number of funds. The third quarter marked the lowest amount raised in a quarter since the third quarter of 2003.

Fundraising by Venture Funds


Funds Capital ($M)
2007 233 30,739.7
2008 212 25,814.7
2009 153 16,191.9
2010 162 13,346.3
2011 147 12,249.7
1Q'09 58 4,945.9
2Q'09 39 4,844.2
3Q'09 34 2,332.0
4Q'09 47 4,069.8
1Q'10 45 4,033.8
2Q'10 48 2,098.4
3Q'10 53 3,593.8
4Q'10 45 3,620.3
1Q'11 46 7,634.2
2Q'11 49 2,895.7
3Q'11 52 1,719.7
Source: Thomson Reuters and National Venture Capital Association

“The quarter's low fundraising numbers are reflective of ongoing challenges within the venture capital exit markets,” said Mark Heesen, president of the NVCA. “Economic instability continues to impact the ability of venture-backed companies to go public which, in turn, has prevented many venture firms from delivering solid returns to their investors. Until we begin to see a steady and sustainable flow of quality IPOs which return cash, limited partners will remain on the sidelines and the venture industry will continue to contract. This situation is one that needs to be rectified in the near term if we want to have adequate dollars to invest in our country's startup companies in the long run.”

There were 33 follow-on funds and 19 new funds raised in the third quarter of 2011, a ratio of 1.74-to-1 of follow-on to new funds. The largest new fund reporting commitments during the second quarter of 2011 was New York-based Raine Partners which raised $72.5 million in its inaugural fund. A “new” fund is defined as the first fund at a newly established firm, although the general partners of that firm may have previous experience investing in venture capital.

VC Funds: New vs. Follow-On

New Followon Total
2007 64 169 233
2008 58 154 212
2009 39 114 153
2010 49 113 162
2011 46 101 147
1Q'09 10 48 58
2Q'09 12 27 3 9
3Q'09 12 22 34
4Q'09 12 35 47
1Q'10 14 31 45
2Q'10 16 32 48
3Q'10 19 34 53
4Q'10 13 32 45
1Q'11 13 33 46
2Q'11 14 35 49
3Q'11 19 33 52
Source: Thomson Reuters and National Venture Capital Association

Third quarter 2011 venture capital fundraising was lead by Menlo Park, California based Shasta Ventures Management & Longitude Capital Management which raised $265 & $159 million respectively for their Shasta Ventures III & Longitude Ventures Partners II Funds.