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 Venture capital fundraising is back to its pre-Internet boom days, but not in a good way.According to statistics released Monday by Thomson Reuters and the National Venture Capital Association, the once booming asset class saw the fewest new funds being raised since 1994 (when AOL was fighting things out with GEnie, Prodigy and CompuServe to provide dial-up Internet services to the masses) while total new capital put under management was the lowest since 2003. In the third quarter of 2009, only 17 new funds closed with a meager $1.54 billion, the lowest level in the last 15 years. Year-to-date, the industry has raised $8.87 billion, indicating it would take a miracle to even come close to the $28.6 billion raised for all of 2008. With pension funds and limited partners far more cautious about where they're allocating money, venture capitalists are feeling the pinch. As NVCA president Mark Heesen told The Deal in August (See video below): "We are in a Darwinian environment and you're going to see the strong survive and you're going to see that limited partners have become much more intelligent in understanding that its not just the firm that you're looking at, its the individuals within that firm." One of the most striking trends is limited partners' hesitation to take chances on new funds, a hesitation that has begun to extend from VCs without a track record to even established firms. Increasingly the only firms able to close new funds are those with big-name dealmakers with hugely profitable track records -- perhaps proving Heesen's point. The largest funds raised in the third quarter were the $750 million Khosla Ventures III and the $196 million Draper Fisher Jurvetson X LP. Khosla, which invests in cleantech startups, is run by experienced entrepreneur and dealmaker Vinod Khosla, who helped co-found Sun Microsystems Inc. (NASDAQ:JAVA) before joining Kleiner Perkins Caufield & Byers in the late 1980s. Meanwhile, Draper Fisher Jurvetson is equally experienced as it is still counting the money it made off its $10 million investment in Skype Technologies SA, when eBay Inc. (NASDAQ:EBAY) agreed to pay $2.6 billion-plus earnouts for the Internet telephony company. Additionally one of the few first-time funds raised in the current environment, Andreessen Horowitz LLC, was started by successful entrepreneurs Marc Andreessen, who founded Netscape Communications Corp., and Ben Horowitz, who with Andreesen founded Loudcloud Inc. and Opsware Inc. With things so tight now, the stage may be set for a far more competitive fundraising environment for 2010, as VCs take a wait and see approach to 2009, and instead go out in earnest next year. - George White Also see: See Corp Dealmaker post Khosla on high-impact VC investments See The Deal magazine story on Andreessen Horowitz fundraising See PE and VC fundraising Dealwatch Private capital video
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