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Contacts:
Venture Capital Fundraising Continues Decline as Industry Strives for Equilibrium
November 4, 2002 – Newark, NJ - Amidst the on-going downward economic cycle, venture capitalists by in large continued to stay on the sidelines and not seek additional capital from investors, according to Thomson Venture Economics and the National Venture Capital Association (NVCA). Fundraising commitments for the third quarter of 2002 remained weak. During Q3 2002, thirty-three venture capital funds were raised, totaling US$1.7 billion, down from US$2.1 billion in the previous quarter, but equal to the dollar amount raised in Q1 2002. The continued weak fundraising levels reflect the high level of reserves committed to venture capital funds but not yet invested, which is estimated at $US 90 billion.
Despite the low commitment levels for this quarter, the data suggests that veteran venture capitalists are still raising money. The majority of funds that were raised in the third quarter were follow-on funds, signifying that experienced firms can continue to raise new money in these turbulent times. Limited partners are showing continued confidence in the venture capital asset class as a long-term investment by placing their money with VCs with previous successful track records. However, new first-time funds such as Echelon Ventures Capital Partners, Mountaineer Capital LP-SBIC, and Signefi, Burnette & Vallee I/IA did successfully come to market this past quarter.
“The venture capital industry is clearly in the process of returning itself to equilibrium and part of that right-sizing is bringing the reserves down to a level that can be invested to produce the long term returns the industry is known for, said Mark Heesen, president of the NVCA. “While some may see these lower levels as negative we feel this is exactly where the VC industry should be if we want to emerge strongly from this economic cycle..”
| a |
Venture Capital
|
Buyout & Mezzanine
|
Fund of Funds
|
| Year/Quarter |
# of Funds
|
Venture Capital
($ Billions)
|
# of Funds
|
Buyout/Mezzanine
($ Billions)
|
# of Funds
|
Fund of
Funds
($ Billions)
|
1997
|
240
|
18.1
|
152
|
54.5
|
22
|
4.4
|
1998
|
292
|
31.3
|
182
|
71.0
|
39
|
10.9
|
1999
|
449
|
61.4
|
172
|
68.9
|
59
|
13.7
|
2000
|
632
|
97.2
|
176
|
86.7
|
60
|
12.9
|
1Q'01
|
116
|
12.1
|
51
|
15.8
|
24
|
3.7
|
2Q'01
|
92
|
11.2
|
33
|
10.5
|
21
|
2.7
|
3Q'01
|
69
|
7.0
|
43
|
15.8
|
11
|
2.7
|
4Q'01
|
92
|
5.5
|
53
|
15.6
|
22
|
5.1
|
1Q'02
|
44
|
1.7
|
18
|
6.0
|
11
|
1.9
|
2Q'02
|
36
|
2.1
|
22
|
6.9
|
7
|
2.0
|
3Q'02
|
33
|
1.7
|
15
|
4.8
|
4
|
.3
|
* These numbers do not include downsized funds
|
|
New Venture Capital Funds vs Follow-on Funds
|
| a |
No. of New |
No. of Follow-on |
1999
|
152 |
297 |
2000
|
224 |
408 |
2001
|
107 |
222 |
Q1'02
|
13 |
31 |
Q2'02
|
14 |
22 |
Q3'02
|
6 |
27
|
Thomson Venture Economics, a Thomson Financial company, is the foremost information provider for equity professionals worldwide. Thomson Venture Economics offers an unparalleled range of products from directories to conferences, journals, newsletter, research reports, and the VentureXpert™ database. For over 40 years, Thomson Venture Economics has been tracking the venture capital and buyouts industry. Since 1961, it has been a recognized source for comprehensive analysis of investment activity and performance of the private equity investment community, in-depth industry knowledge, and proprietary research techniques. Private equity managers and institutional investors alike consider Thomson Venture Economics information to be the industry standard. For more information about Thomson Venture Economics, please visit www.ventureeconomics.com.
Thomson Venture Economics’ Private Equity Performance Database provides an array of benchmarks ranging from individual vintage year benchmarks, industry returns, cashflow and overhang analysis, all of which are available on our VentureXpert™ web product. In addition to the web product, Thomson Venture Economics offers various books and reference guides under our Investment Benchmark Report series. For further inquiries, please contact Neil Goldstein at (415) 732-6293 or via email at neil.goldstein@tfn.com.
The National Venture Capital Association (NVCA) represents over 450 venture capital and private equity organizations. NVCA’s mission is to foster the understanding of the importance of venture capital to the vitality of the U.S. and global economies, to stimulate the flow of equity capital to emerging growth companies by representing the public policy interests of the venture capital and private equity communities at all levels of government, to maintain high professional standards, facilitate networking opportunities and to provide research data and professional development for its members. For more information, please visit www.nvca.org.
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