While venture funds raised $5.6 billion in the fourth quarter of 2011, a 162 percent increase over the third quarter, there was a 41 percent drop in the number of funds, with 38 venture funds raising capital compared to the 64 that raised $2.1 billion in the previous quarter, as firms continued to consolidate, according to a recently released report by Thompson Reuters and the National Venture Capital Association.
This past quarter marked the lowest number of firms raising money since the third quarter of 2009.
“This past year we saw more venture capital money raised by essentially the same number of firms, a sign that consolidation within the industry is continuing,” said Mark Heesen, president of NVCA. “We also continued to invest more money in companies than we raised from our investors. Both of these trends — if they continue — suggest that the level and breadth of venture investment is starting to recalibrate to reflect a concentration of capital in the hands of fewer investors. Our cottage industry is indeed getting smaller still and that will impact the startup ecosystem over time.”
The fourth quarter saw 29 follow-on funds and nine new funds, a ratio of 3.22-to-1 of follow-on to new funds. Revolution LLC ranked as the largest new fund reporting commitments, raising $450 million.
Khosla Ventures led the quarter in fundraising at $1.05 billion, the largest fund for the firm and the fourth largest of the year. Bessemer Venture Partners III was the top fund of 2011 at $1.6 billion, followed by Sequoia Capital 2010, LP at $1.3 billion and JP Morgan Digital Growth at $1.2 billion.