Venture capital fundraising drops to 8-year low

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

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