Thirty-eight US venture capital funds raised USD5.6 billion in the fourth quarter of 2011, according to Thomson Reuters and the National Venture Capital Association (NVCA). This level marks a 162 per cent increase by dollar commitments but a 41 per cent decline by number of funds compared to the third quarter of 2011, which saw 64 funds raise USD2.1 billion during the period.
This quarter marks the lowest number of funds raising money since the third quarter of 2009. US venture capital fundraising for all of 2011 totalled USD18.17 billion from 169 funds, a 32 per cent increase by dollars compared to 2010 and with the same number of funds.
"This past year we saw more venture capital money raised by essentially the same number of firms, a sign that consolidation within the industry is continuing," says Mark Heesen (pictured), president of NVCA. "We also continued to invest more money in companies than we raised from our investors. Both of these trends – if they continue — suggest that the level and breadth of venture investment is starting to recalibrate to reflect a concentration of capital in the hands of fewer investors. Our cottage industry is indeed getting smaller still and that will impact the startup ecosystem over time."
There were 29 follow-on funds and 9 new funds raised in the fourth quarter of 2011, a ratio of 3.22-to-1 of follow-on to new funds. The largest new fund reporting commitments during the fourth quarter of 2011 and for the full year was from Washington, D.C. based Revolution LLC which raised USD450 million for the firm’s inaugural fund. A "new" fund is defined as the first fund at a newly established firm, although the general partners of that firm may have previous experience investing in venture capital.
Fourth quarter 2011 venture capital fundraising was lead by Menlo Park, California based Khosla Ventures which raised USD1.05 billion, the firm’s largest fund to date and the fourth largest fund year-to-date. Raising USD1.6 billion, Bessemer Venture Partners III was the top fund of 2011 while Sequoia Captial 2010, LP. (USD1.3 billion) and JP Morgan Digital Growth fund (USD1.2 billion) were second and third respectively.
