Venture capital fundraising plunges 60% in Q4

January 21st, 2009, 6:00 pm · 2 Comments · posted by Jan Norman, small-business columnist

More sobering news for Orange County entrepreneurs hoping to attract equity investments for their ventures this year.

Fundraising by venture capitalists in the fourth quarter declined 60% to less than $3.4 billion, the lowest quarter in at least three years, according to Thomson Reuters and the National Venture Capital Association.

Here’s their quarter-to-quarter numbers:

Source: Thomson Reuters, NVCA

Fundraising for all of 2008 was $27.9 billion, down 21% from 2007 and the lowest since 2004.

Orange County companies have been doing well in attracting investments this year. Click here for more.

However. without new money, venture investing, which has been on the decline, could be even lower down the road but maybe not in 2009.

“The drop in venture capital fundraising activity in the fourth quarter is not surprising for two reasons,” said Mark Heesen, president of the National Venture Capital Association. “First, the market uncertainty has compelled firms that were planning to raise a fund in late 2008 or early 2009 to hold back on fundraising efforts until economic conditions improve and institutional investors can recommit with confidence.

“The second and less obvious reason,” he adds, “is that many venture capital firms raised money in the last two years and are focused on deploying those funds. With some notable exceptions, we can expect this slower pace to continue well into 2009.”

So when that money raised in 2007 and 2008 has been invested, watch out.

Here are the yearly fundraising totals for the past six years: