The tough times for venture capitalists in the US persist.
The first three months of this year marked the slowest opening quarter to any year since 1993. The $3.6bn raised for new funds was down 31 per cent from the same time last year, and the 32 funds marked a 44 per cent decline, according to Thomson Reuters and the National Venture Capital Association (pdf).
The sluggish opening to the year is probably the result of the stubbornly closed public markets. “Many firms have been waiting until the exit market improves before embarking upon their fundraising efforts,” said NVCA president Mark Heesen. “This wait has been considerably longer than many firms anticipated.”
Despite a surplus of private companies that could likely go public if they chose to (including Facebook, LindedIn and Zynga), executives at these companies are sitting tight until market conditions improve further. Meanwhile, lower capital costs for many web startups has made large rounds from VCs less needed.
The largest funds raised during the first quarter were at two established firms, Battery Ventures and Oak Investment Partners, which each raised $750m funds. The largest of just five new funds was Boston-Based Longwood Founders Fund, which raised $50.7m in its inaugural fund.
With no sign of a turnaround in the near future, even insiders admit that venture capital firms have probably not seen the worst of it yet. “The next few years will see the industry consolidate with the strongest firms surviving,” said Mr Heesen.
