What downturn? VC firms raised more money in second quarter

Venture capital firms raised $9.1 billion from their investors in the second quarter of 2008, or 3 percent more than they did during the same period a year ago.

While the stock market has tanked, venture capital firms have been able to raise money in part because they invest for the long-term, and their investors may see venture capital as a way to diversify now that many other parts of the economy are hurting. Private equity firms, or those that buy or invest in later-stage companies, have been more impacted by the stock market.

Still, there were fewer VC firms raising money: Only 71 firms raised money, a decline of 14 percent from the same period in 2007, according to the survey by Thomson Reuters and the National Venture Capital Association (NVCA). The money invested in the firms increased by three percent, up from $8.8 billion.

More money is going into fewer firms because investments have moved to capital intensive industries such as life sciences and clean technology, the survey concluded.

However, the number of new firms raising money was relatively high. Twenty-two firms raised money for the first time, whereas 49 “follow-on” funds by preexisting firms were raised. That’s a ratio of 1-2, compared to 1-4 a year ago.

The largest funds raised in the second quarter were Lightspeed Venture Partners VIII, L.P. (balanced stage; $800 million), Foundation Capital VI, L.P. (early stage; $750 million), and Kleiner Perkins Caufield & Byers XIII (early stage; $700 million).

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