U.S. venture capital fundraising experienced its slowest first quarter start this year since Q1 1993. Venture firms raised $3.6 billion from 32 funds during the first three months of the year, a 31% decline by dollar commitments and a 44% drop by number of funds compared with Q1 2009, according to an April 12 announcement by National Venture Capital Association (NVCA) and Thomson Reuters.
Of the active funds during the quarter, 27 were follow-on funds and five were new ones. NVCA and Thomson Reuters define “new” as the first funds at a newly established firm, even when the general partner has venture capital investing experience.
“There is no question that the bar has been raised for venture capital fundraising,” NVCA’s president Mark Heesen said in a statement. “Over the last two years, alternative asset allocations have declined and the exit market has suffered, putting venture firms in the unenviable position of communicating their value in an extremely challenging environment. Many firms have been waiting until the exit market improves before embarking upon their fundraising efforts.”
In fact, the exit market perked up during Q1 2010. An NVCA and Thomson Reuters exit poll reported the best quarterly total for venture-backed IPOs since Q4 2007 and the best quarter on record for venture-backed M&A exits. The quarter ended with nine venture-backed IPOs and 111 M&A transactions. The 31 disclosed M&A exits had an average deal value of $180 million, 21% higher than the total average disclosed transaction value for all of 2009.