Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

Venture capital fundraising drops to 8-year low

October 10, 2011 |  9:04 am

The U.S. venture capital industry raised its lowest amount of money in eight years
The U.S. venture capital industry raised its lowest amount of money in eight years, stymied by a recent panoply of economic bad news.

Firms raised $1.7 billion in the third quarter, said the National Venture Capital Assn. That's 53% less than the $3.5 billion raised in the same period a year earlier and the smallest pot since the third quarter of 2003.

The year started out with heavy fundraising, garnering $7.6 billion in the first quarter.

But then the economic recovery began to sag. Europe found itself mired in a debt crisis. U.S. credit was downgraded. Companies began delaying or calling off anticipated initial public offerings -– Zynga, Groupon and Facebook have all yet to go public, despite rampant speculation.

"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," Mark Heesen, president of the venture capital group, said in a statement.

The industry, he said in a blog post, has been investing more than it's been raising since 2008 -– an overhang that will reach $20 billion by the end of the quarter.

"Just like a bubble," he wrote in the post, "this imbalance is not sustainable."

The report was conducted with Thomson Reuters.


Groupon, Zynga reportedly delay IPOs

Report: Facebook delays IPO until late 2012

Venture capital funding and deals rise in 2010

-- Tiffany Hsu

Photo credit: Brian van der Brug / Los Angeles Times