3Q12 Fundraising Data – Drum Roll Please…

The National Venture Capital Association (NVCA) and Thomson Reuters released today the 3Q12 VC fundraising data, which is a report I eagerly await as it is a barometer of the health of the VC industry. And while 53 funds were raised – the largest number since 3Q11 – only $5.0BN was raised which continues the quarterly trend downwards since mid-2011; there was $6BN raised in 2Q12. Year-to-date VC’s have raised $16.2BN which suggests that for the full year VC’s will raise between $21-$23BN – not too shabby given the Great Recession and the generally uninspiring returns for the past decade across the industry. In all of 2011 VC’s raised $18.6BN. But it is what is beneath the headlines that I always find fascinating…

  • No doubt the industry is shrinking (which over time will be very healthy for those firms that remain active) – year-to-date there was a 13% decline in the number of funds raised when compared to the same period in 2011
  • But over that same year-to-date period the amount of capital in 2012 was up 31% when compared to the first nine months of 2011 – which included arguably the worst two quarters in recent memory (2Q11 and 3Q11) for VC fundraising
  • Interestingly, of the 53 funds raised, only 16 were new funds (more on that later)
  • If one considers NEA a Silicon Valley firm (I know they are headquartered in Baltimore but they have a very large and successful west coast practice), the top five funds raised are in San Francisco and represented 55% of the capital raised
  • Nine of the top ten funds are in California; #10 (Pharos Capital) calls Dallas and Nashville home
  • The average size of fund raised in 3Q12 was $94M, although the median was $160M
  • This is more troubling – the average size of new first-time fund raised was $9M while the median was $2.5M (that is not a typo). In fact 19 of the 53 funds raised this past quarter were less than $5M in size
  • The largest new first-time fund raised was by Forerunner Ventures ($42M) which ranked #22 of the 53 funds raised
  • The largest fund raised in 3Q12 was the $950M growth fund raised by Sequoia Capital – the rich get richer!

So what is there to make of all this? While I expected more rapid contraction of the industry, the amount of consolidation at the top of the pyramid is dramatic. Arguably this implies a more challenging time for entrepreneurs as there continues to be fewer robust VC franchises available to them, and those that are active, will tend to be centered around San Francisco. On a more hopeful note though, VC returns have meaningfully improved in recent times so perhaps we may start to see over the next few quarters a greater fundraising pace across more firms – a trend well worth monitoring.

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10 Comments

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10 responses to “3Q12 Fundraising Data – Drum Roll Please…

  1. Mark L

    Great update this quarter. Are you seeing any trends in the data that suggest shifts in type of company/technology/industry being funded?

  2. Pingback: 3Q12 Fundraising Data – Drum Roll Please… | Private Equity Capital

  3. Pingback: Q3 2012 VC Fundraising Data and Conclusions | ithacaVC

  4. Scott mackinnon

    The median of 2.5M with an average of 9.0 M–That is consistent with your observation of smaller consumer internet seed funded companies. I’m curious as to what’s happening in healthcare, as the current election milieu is making things even more confusing and uncertain.

    • I worry that it is not pretty – although a few pure life science funds have been raised in the last year. the real contraction in my mind is late stage life science investors – so maybe that is where the greatest opportunity now lies?

  5. John Landry

    Michael.. It remains a mystery to me how the ‘partners’ of a $5M (or less) fund keep food on the table — a 2% fee would yield $100k/yr income to support the office, legal, and all compensation and benefits. Now that’s betting on the come! JL

  6. Pingback: 3Q12 Fundraising Data – Drum Roll Please… | SBL

  7. Pingback: 3Q 2012 VC Fundraising Totals Released | SDVG

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