VC Funds Continue to Dry Up
According to a report earlier this week by the National Venture Capital Association, 2010 saw venture capital fundraising drop for the fourth consecutive year. During that time, the number of funds has shrunk from 235 to 157 while funds raised have dropped more than 61% (from $31.9 billion to $12.3 billion).
According to the head of the NVCA, don't expect that trend to reverse itself in the year ahead.
“Given current conditions, a limited number of venture firms will be able to successfully raise new funds in 2011 and many of these will be smaller than previous funds raised,” said Mark Heesen, president of the NVCA.
What does the VC community itself think? It depends who you ask. Roughly equal numbers see an increase in fundraising (38%), a decrease in fundraising (32%) and no change (30%).
The largest fundraising during the fourth quarter of 2010 comes from Silicon Valley. Menlo Park-based Andreessen Horowitz Fund II, L.P. raised $650 million, followed by Palo Alto-based Meritech Capital Partners IV, L.P., which raised $390 million.
Heesen isn't giving up though, "As the year progresses and the exit market continues to improve, we expect better performance from established funds as well as from recently raised funds which have the opportunity to invest in great companies at a time when valuations are more reasonable and the economy as a whole points upward.”
That sentiment is shared with the VC community at-large as more than half (51 percent) expect actual investment to pick up in 2011.