More evidence that venture exits and fund raising are related. We already know that venture exits were anemic in the third quarter of 2009, and now the National Venture Capital Association has released data on how much money venture funds themselves were able to raise. It was not a lot in historical terms.
According to the NCVA’s data, venture funds raised $1.6 billion in the third quarter, down 82 percent from a year ago and down 21 percent from last quarter. What’s more is that about $1 billion of that was accounted for by one VC firm, Khosla Ventures. Although, the NCVA only notes Khosla’s bigger $750 million fund, so it is not clear if it is including its smaller seed fund as well in these figures.
The largest new fund in the quarter was Andreessen Horowitz, which is a $300 million fund. But again, the NVCA association only counts $58.5 million. Perhaps that is how much cash they took in and the rest is commitments. But since it is willing to spend up to $50 million per investment, and is participating in the huge round Skype raised, maybe it’s time to call their LPs again. Or maybe, the NVCA’s data is incomplete. Update: Andreesen says it is the latter: “It’s a data glitch related to how the filings work and how the commitments came in — we raised $300 million (exactly — to the penny) for the fund.”
Either way, it is astounding that one or two funds can account for nearly all the venture money raised in a quarter. But perhaps that is function of the fact that not many funds actually raised money. Only 17 funds raised cash in the quarter, compared to 63 a year ago.
Are those 2 charts different?
Good. Excelent. More please.
Ignore the VCs. Grow the company on sweat and revenue.
VCs should have to report their whereabouts like pedophiles. They are that dangerous.
Stay Away!
sorry, charts now fixed
They have been put twice so that we can see how bad situation is !!
Interesting post on the VC industry in general I picked up some time ago. Recessions are great at increasing efficiency and cutting off fat–except in gov’t, but that’s a discussion for another day.
http://abovethe...pital-industry/
VC doesn’t really make sense any more for most entrepreneurs. Most VC’s don’t bring much to the table so why would anyone want to talk with them? And now that the crooks have become VC’s too why would anyone give them money to loose? Venture funding will evolve, the VC industry as we know it today is questionable and pretty tainted.
So, let me ask you, are VCs going to be something from the past, and a new method of funding will replace it anytime soon? Or it is just the recession, and everything will get back to normal after it?
I’ve just have made a comment on a similar article on Venturebeat. Not much to add to it, besides that the VC model is archaic. It has to be totally revisited – framework, benefits for portfolio companies etc.
The reason Adreessen Horowitz only shows for $58M is that the rest of their money was raised in the second quarter. NVCA counts only the commitments received during a quarter, not the total fund size. Most VC firms have multiple closings for their funds, which can stretch over one, two or even five quarters.
Meanwhile, VCs are starting to spend according to latest news on funding deals from US and Europe. http://bit.ly/VCQ309
It’s not about funds being raised it’s all about how well they are invested in ventures and how useful are those ventures…
We’re tracking the data Mark Littlewood mentions above at http://timetric...m/labs/venture/ – we’ll be adding this data ASAP. It’ll be interesting to see what the difference is between cashflow into and out of VC funds!
Okay, that’s the data in there. Going by the Calibre One/BLN data, the last two quarters are the first in quite a while where VC funds have invested more money than they’ve taken in, which is interesting. (If you want to analyse the raw data yourselves, it’s on Timetric at http://timetric...om/tags/thebln/.)
The “I drink your milkshake” line on the teaser image is classic.
For those who may not have seen the movie, Daniel Day Lewis said it in “There Will Be Blood”
Maybe it’s because it’s taking longer for exits? Who wants to invest more money into companies if any/all of the companies in the venture fund are further away from an exit strategy, that means it could be awhile before they see returns. I’m sure that has something to do with it, and I’m sure the recessionary period that we’re in doesn’t help any.
The “I drink your milkshake” line on the teaser image is classic.
For those who may not have seen the movie, Daniel Day Lewis said it in “There Will Be Blood”
I don’t remember the line but am aware of a certain homo-erotic meaning as well that wasn’t intended.
I wish people would stop bashing VCs. They’re not evil. The problem is entrepreneurs don’t recognize that a VC is not a charity, is not a nice old grandmother. Its a financial institution which means they answer to their investors and not the entrepreneurs.
The relationship that a VC has with its investors and its portfolio companies will create inherant conflicts of interest which entrepreneurs must be aware of.
Entrepreneur needs 1 million to grow a venture with 33% risk of failure. More money = heavier commitments, irresponsible spending, pressure to go after bigger contracts instead of smaller more sustainable ones. VC sees more potential. Pushes entrepreneur to take 5 million. Risk goes up to 50% failure. For a VC this is fine since they take a portfolio approach – some will fail some will hit. In addition VCs don’t want too many investments to keep track of. With a similar payout ratio (say 10x) a 10 million payout with a 33% risk of losing it all is far worse for a VC than a 50 million payout with a 50% risk. However for the entrepreneur who has all his eggs in one proverbial basket, the 33% risk is a better one. And usually they’ll hold on to more of the company that way too.
Just remember, VCs are investors and financial institutions. They run the numbers based on a portfolio approach. Know what you’re getting yourself into before you take their money.
So we have not seen the turnaround yet, looks like.