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18

Jan

2011

A Challenging VC Fundraising Year PDF Print E-mail

Mark Heesen

Written by Mark Heesen   
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Today the NVCA and Thomson Reuters released Q4 and year-end venture capital fundraising data for the United States.  This information should not be confused with venture investment numbers which will be released this Friday, January 21.  Fundraising tracks dollars raised from institutional and accredited investors by venture capital funds. 

It came as no surprise that venture fundraising numbers were down for the year and at the lowest levels since 2003.  The venture industry continues to contract, which will have long term implications on funding and returns.  When the industry only raises $12 billion each year, the probability of over-funding any particular sector (i.e. Clean Tech or Internet) becomes very low.  This reality is a positive one as the funding levels remain adequate for the best firms to continue to invest in the best deals without many "me-too" companies being funded along the way.  Over time, this also promises to boost returns for those firms who remain active.

Still, we will continue to see a shakeout of the industry and can expect more VC firms to both downsize and disappear.  Today's fundraising news dovetails with a Coller Capital Global Private Equity Barometer also released today which conveys more challenges ahead for the VC and PE industries.  Here at the NVCA, we tend to agree with the study's assessment.

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