Fewer Venture Firms Take Big Bucks

Venture capital firms raised more money to invest in startups in the fourth quarter, and for the year.

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Fewer venture capital firms are raising bigger bucks to invest in startups, according to a study released this morning.

The Thomson Reuters National Venture Capital Association report showed 38 venture capital firms hauled in $5.6 billion in the fourth quarter, a 162 percent increase in dollars going to venture capitalists over the third quarter of 2011.

But those dollars were spread among fewer firms. The number of firms raising money declined 41 percent, from 64 funds raising $2.1 billion in the third quarter. That’s the smallest number of funds raising money since the third quarter of 2009.

For the year, 169 firms raised $18.17 billion, an increase of 32 percent over 2010 venture fundraising. The number of firms raising money remained stagnant at 169.

"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, in a release. "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."

While Heesen said this "cottage industry" was definitely getting smaller, the numbers show that the biggest venture capital firms got bigger.

Khosla Ventures hauled in $1.05 billion in the fourth quarter, the biggest raise of the quarter. For the year, Bessemer Venture Partners raised the largest fund at $1.6 billion, followed by Sequoia Capital raising a $1.3 billion fund and JPMorgan raising $1.2 billion.