Venture Capitalists Refund $2.7 Billion

U.S. venture capital firms released investors from $2.7 billion of commitments in the second quarter, exceeding the amount raised in new commitments by other funds, as the industry copes with its worst slump ever, a new survey said.

Seven big venture funds said they effectively returned $2.7 billion to their limited partners in the quarter rather than invest the money, according to a survey by the National Venture Capital Assn. and Thomson Venture Economics.

In the same period, other venture firms gathered $1.8 billion of investor commitments for 30 new funds, but that was down 84% from $11.2 billion in commitments a year earlier.

When the canceled commitments are subtracted from the fund-raising total, committed capital last quarter showed a net decline of $887 million, NVCA said.

The crash of the technology sector and the dive in stock prices in general have left many venture capital investors wary of making new funding commitments to young companies.

With the market for new stock offerings a shadow of what it was in the boom years of the late 1990s, and with the corporate appetite for mergers and acquisitions deeply depressed, some venture capitalists fear there may be no route for them to cash out of their investments in private companies.

The seven funds that canceled some of the capital pledged to them in 2000 and 2001 were Accel Partners, Atlas Ventures, Austin Ventures, Charles River Ventures, Meritech Capital Partners, Walden International and Worldview Technology Partners.