VCs raised fewest funds in Q2 since 1996

July 13, 2009 | Anthony Ha | Comments | |

hard-timesWe’ve already published (unsurprising) data showing a big drop in the funding raised by venture capital firms during the last six months. Now the National Venture Capital Association and Thomson Reuters have released a new set of numbers focusing on the second quarter of the year (April through June), which apparently saw even less venture fundraising than the first.

Here are the basics: VCs raised 25 funds for a total of $1.7 billion. That’s the smallest amount of money raised in any quarter since 2003, and the lowest number of funds since 1996. It even represents a major decline compared to the first three months of the year, when firms raised $4.6 billion for 49 funds. And those numbers already prompted VentureBeat Editor Matt Marshall to write, “It really is the end of the tech boom .” (The NVCA/Thomson Reuters numbers are a bit higher than the ones released by Dow Jones Private Equity Analyst last week — for the first half of 2009, the NVCA shows 74 funds raised compared to Dow Jones’ 51, and $6.3 billion raised compared to Dow Jones’ $5.1 billion.)

“We believe that many venture firms are waiting until 2010 and beyond to go out to their limited partners who, in an improved market, will look more favorably upon the asset class vis-a-vis other alternatives,” said NVCA President Mark Heesen in a press release. “That said, there will be firms that will not be able to raise a follow-on fund and our industry is positioned to contract over the next five years through this type of attrition.”

This doesn’t necessarily mean a startup with a strong team and brilliant idea won’t get funding, since many VCs still need to find a way to invest the money they’ve raised over the past few years. But it certainly isn’t going to improve your funding chances, either …

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About the Author, Anthony Ha

Anthony is VentureBeat's assistant editor, as well as its reporter on enterprise technology, cloud computing, and tech policy. Before joining VentureBeat in 2008, Anthony worked at the Hollister Free Lance, where he won awards from the California Newspaper Publishers Association for breaking news coverage and writing. He attended Stanford University and now lives in San Francisco. Reach him at anthony@venturebeat.com. You can also follow Anthony on Twitter.

  • elliottdahan
    VCs provide money for growth based on various metrics of "traction" (# users, # customers, revenue, etc.)

    VCs do not provide money for creation or innovation - that is the role of Seed Funding.

    Therefore, it is imperative that the Seed stage be strengthened so that companies have the means to achieve the necessary levels of traction demanded by various VCs.

    The heavy lifting of the Seed stage is: sourcing, screening and oversight of the Seed companies and their entrepreneurs.

    The problem does not lie with a broken VC model - the problem lies with providing entrepreneurs with access to Validation Partners and Seed Money.

    The Seed Support problem cannot be solved by the current (and ever increasing) number of Drive By Mentor programs, Seed Summer Camps and Entrepreneur Reality Shows. If anything, these time limited, resource limited and oversight limited programs are cruel hoaxes in that they raise the hopes of the entrepreneur and provide no real answers or needed solutions.

    VCs will invest.