With the market for initial public offerings still on ice and dark clouds looming over the United States economy, the venture capital industry is struggling to raise money.
Venture capital firms raised $1.72 billion in the third quarter, the lowest level since 2003, according to a report released on Monday by Thomson Reuters and the National Venture Capital Association. The amount also represented a 53 percent plunge from the period a year earlier. In all, 52 firms managed to raise money in the quarter, a 4 percent decrease.
The industry started the year on a strong note amid soaring enthusiasm for fast-rising Internet companies like Facebook and Groupon. Several major firms, which managed to get shares in these companies early, were able to parlay their success into big fund-raising rounds. Accel, for instance, one of Facebook’s earliest backers, announced in June that it had closed two funds, totaling $1.35 billion in new capital.
But recent market volatility has started to wear on the industry. Venture-backed companies, including Groupon, have delayed their public offerings. In the third quarter, just five venture-backed companies went public. Valuations, meanwhile, have started to tighten across the board, according to analysts.
“The quarter’s low fund-raising numbers are reflective of ongoing challenges within the venture capital exit markets,” Mark Heesen, president of the National Venture Capital Association, said in a statement. “Until we begin to see a steady and sustainable flow of quality I.P.O.’s which return cash, limited partners will remain on the sidelines, and the venture industry will continue to contract.”
Article source: http://feeds.nytimes.com/click.phdo?i=4d1de9818d17a8ccf1a7c991fe3d4b07
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