01/01/2004
Those of us with investments in venture capital funds may want to check to see if our money has been invested yet. Venture capital firms are struggling to find attractive investment opportunities for about $84 billion in capital that they have already raised, according to Thomson Venture Economics, a company that tracks the industry’s statistics, and the National Venture Capital Association, a trade group. Because of this glut, new fundraising activity is mostly on hold. Only 19 venture capital vehicles finished their fundraising in the third quarter of 2003, raising a total of $1.4 billion.
That is less than half the funds raised in the same period in 2002, when 50 new venture capital funds raised a total of $2.9 billion. The 19 new funds brought the total number in the first three quarters of 2003 to 74, compared to 631 funds in the Internet heyday in 2000.
This grim situation may be changing, according to Jesse Reyes, director of the
U.S. branch of Thomson Venture Economics. "Fundraising activity is beginning to
pick up."
About half of the $84 billion is thought to be tied up in reserves for follow-on financing, that is, second or third-round investments in existing companies, according to the National Venture Capital Association. That leaves between $35 million and $45 million for new investments.