Is the venture capital industry back? The latest report from Thomson Reuters and the National Venture Capital Association shows that U.S. VC firms raised $20.6 billion from 182 funds during 2012. After being nearly cut in half from 2008 ($25.6 billion) to 2010 ($13.7 billion), it marks a second straight year of growth despite the number of funds dropping slightly (187 in 2011 to 182 in 2012).
"The venture capital fundraising environment has settled into a 'new normal' which is characterized by a barbell structure of larger funds which are stage and industry agnostic on one end, and smaller, early stage, industry or region specific funds on the other," said Mark Heesen, president of NVCA. "It is on these two ends of the spectrum where capital is concentrating and successful firms are raising follow-on funds. Simultaneously, new funds continue to enter the asset class, almost exclusively at the smaller end of the spectrum. This structure, coupled with increasingly discerning limited partners, has kept the overall size of the venture industry below $25 billion each year since 2009, a size that many believe to be optimal for successful investing and maximizing returns."
The totals seemed poised to go even higher, but the fourth quarter was considerably weaker than it was in 2011—perhaps partly due to widespread concern over the potential fiscal cliff that was (somewhat predictably) avoided with a last-minute compromise.
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