VC Funds Down; Late-Stage Funds Take Biggest Hit

Dow Jones Private Equity Analyst confirms what we all suspect: Venture-capital funds are down sharply in number and in amounts raised.

Venture capital funds raised $3.5 billion in 26 funds in the third quarter of 2009, a 51% decline from the $7.2 billion raised in the same quarter last year, according to Dow Jones Private Equity Analyst. In total, venture-capital firms raised $8.0 billion across 83 funds thus far in 2009, less than half of the $18.9 billion raised by 141 funds in the same nine-month period last year.

As investors realize that difficult economic conditions will persist for the foreseeable future, they’re taking particular care to keep their money out of late-stage venture funds, which raised $564 million through the first three quarters of 2009, a vertiginous decrease from the $3 billion raised in the same period last year.

The situation is better, but not great, for early stage funds, which raised $1.6 billion across 18 funds in the latest quarter, down from $2.9 billion raised by 17 funds in the third quarter last year.

Multi-stage firms raised $1.8 billion across seven funds, down from $2.6 billion raised by 17 funds in the same quarter last year.

Not surprisingly, big VC firms fronted by marquee names are doing relatively well. Those players include Khosla Ventures, with its focus on cleantech; Domain Associates, with its life-sciences orientation; Matrix Partners; and newcomer Andreessen Horowitz, which, of course, has celebrity entrepreneur Mark Andreessen to wave its banner.

Toward the end of August, Benchmark Capital’s Bill Gurley explained why the venture-capital industry is being downsized and reconfigured. The results of those industry dynamics are apparent in the latest numbers from Dow Jones.

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