A new report out from the National Venture Capital Association indicates that 35 funds raised $4.1 billion during the first quarter. That compares to 53 funds that raised $4.7 billion in the first quarter of 2012.
“The first quarter venture fundraising activity represents more than just a “slow start‟ to the year and really demonstrates the contracting and consolidating nature of our asset class,” said John Taylor, head of research for the NVCA. “The lack of a strong exit market is keeping many funds that would like to be raising money away from investors until they can demonstrate a track record. This dynamic is keeping the number of funds raised low. Many of the larger funds closed last year and won‟t be back in the market until 2014 and beyond, keeping total dollar levels lower this year. We should be prepared for fewer funds in 2013, which will ultimately decrease investment levels from traditional firms.”
The contraction in the market is being felt in the Seattle area where Ignition Partners raised $150 million for its fifth fund — down from the $400 million it previously raised. Other venture capital funds in the region, including OVP Venture Partners and Frazier Technology Ventures, have ceased making new investments as they decided against raising new funds.