Fewer Venture Funds Raise More Money in Q2

Despite the current credit crunch, economic weakness and a difficult exit environment, the flow of funds into US venture capital funds remained healthy in the second quarter.

According to Thomson Reuters and the National Venture Capital Association (NVCA) , 71 capital funds raised $9.1 billion in the second quarter of 2008 . The number of funds raised in the second quarter of 2008 decreased by 14% from the same period in 2007 while the dollar value increased by 3%.

The ratio of follow-on to new funds was approximately 2-to-1 in the second quarter of 2008, compared to 4-to-1 in the second quarter of 2007. Twenty-two new funds and 49 follow-on funds were raised in the second quarter. A “new” fund is defined as the first fund at a newly established firm, although the general partner of that firm may have previous experience investing in venture capital.

The largest funds raised in the second quarter were Lightspeed Venture Partners VIII, LP balanced stage; $800 million), Foundation Capital VI, LP (early stage; $750 million), and Kleiner Perkins Caufield & Byers XIII (early stage; $700 million).

Mark Heesen, president of the NVCA said “Venture firms and general partners with proven track records will continue to be successful raising new funds as promising investment opportunities remain strong across a diverse set of industries including life sciences, clean technology and information technology.”

Despite the significant challenges that the venture capital industry is facing in the exitmarket, this quarter demonstrates the long term perspective of our institutional investors.