VC fundraising plummets

The Tampa Bay Business Journal reports: Just two years ago, 77 venture capital firms were out on the market raising some $8.6 billion.

This past quarter, however, it was a much different story as just 17 firms—the lowest since 1994—raised just $1.6 billion.

“Anecdotally, we are hearing that fundraising activity is accelerating as more firms that were waiting for economic recovery are beginning to formally seek commitments,” said Mark Heesen, president of the National Venture Capital Association, in a release. “The reality, however, is that many limited partners are still determining their long-term strategies in wake of the past year’s financial crisis, and that slows the process down considerably.”

In fact, commitment levels are expected to remain modest through the end of the year, Heesen said, with some gradual increases beginning in 2010.

VC fundraising has been on the decline since the end of 2007, when $36.1 billion has been raised. Since then, less than $37 billion has been raised, and just $8.4 billion this year, based on numbers compiled by NVCA and Thomson Reuters.

Of the 17 funds, four were new funds and 13 were follow-on funds. The largest new fund reporting commitments during the third quarter was Andreessen Horowitz Fund I LP, which raised $58.5 million.

The largest fund raised overall in the third quarter was a follow-on fund operated by Khosla Ventures III, which raised $750 million for an early-stage fund, followed by Draper Fisher Jurvetson X LP, which raised $196 million.

The news followed reports earlier this month that the venture-backed exit market continues to sputter in the third quarter.

There were three venture-back IPOs in the quarter, bringing the year’s total to eight, following four quarters i which just one IPO took place. The average IPO offer amount was $190.7 million, the highest average since the third quarter of 2008, when one IPO was offered for $187.5 million.