Bloomberg News

U.S. Venture Capital Fundraising Falls to Lowest in Eight Years

October 10, 2011

Oct. 10 (Bloomberg) -- U.S. venture capital fundraising dropped to the lowest in eight years in the third quarter as a slowing economic recovery and debt crisis in Europe led to fewer initial public offerings.

Venture firms raised $1.72 billion in the period, down 53 percent from the same period a year earlier and the lowest amount since the third quarter of 2003, the National Venture Capital Association said today in a statement.

Companies canceled or postponed $8.9 billion in IPOs in the third quarter as stocks plunged, hurting returns for venture capitalists and investors in their funds. The Standard & Poor’s 500 Index tumbled 14 percent in the quarter, the biggest decline since the fourth quarter of 2008. Volatility surged amid an intensifying European debt crisis and a U.S. credit downgrade from ratings service S&P.

“The quarter’s low fundraising numbers are reflective of ongoing challenges within the venture capital exit markets,” said Mark Heesen, president of the Arlington, Virginia-based NVCA, in the statement. “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.”

The biggest fund was raised by Shasta Ventures in Menlo Park, California, which brought in $265 million. Longitude Venture Partners, a life sciences firm also in Menlo Park, raised the second biggest fund at $159 million. The data was compiled by the NVCA and Thomson Reuters Corp.

--Editors: Lisa Rapaport, James Callan

To contact the reporter on this story: Ari Levy in San Francisco at Alevy5@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net


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