Venture Capital Slows to Trickle

Net funds raised hits nine-year low

By Hui-Yong Yu, Bloomberg News (appeared in Rocky Mountain News 5/6/03)
May 6, 2003

NEWARK, N.J. - U.S. venture capital firms raised a net $603.6 million for new funds in the first quarter, a nine-year low, as the industry copes with a glut of capital, according to a trade group survey.

In Colorado, Fort Collins-based Vista Ventures raised $45 million for an existing fund last quarter, representing the total amount of venture capital funds raised in the state. A special investment program administered by the U.S. Small Business Administration kicked in most of the money for the fund.

In the United States, venture capital firms raised $996.1 million for 22 new funds in the first quarter, a 41 percent decrease from a year earlier, according to a survey by Thomson Venture Economics and the National Venture Capital Association.

After subtracting capital pledges waived by firms that raised more money than they could invest in previous years, the net was $603.6 million, the lowest since a net $403.9 million in the third quarter of 1994.

Almost three-quarters of the new funds were the second or subsequent effort by firms. Intersouth Partners VI LP, Caduceus Private Investments II LP, and Arch Venture Fund VI LP were among the new funds raised last quarter. First-time funds included Quaker BioVentures Fund I, Lumina Ventures LP and NeuroVentures Fund LP.

"It's going to be awhile before we see venture capital fund-raising activity pick up," Mark Heesen, president of the NVCA, said in a statement.