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Trending Downward: VC Fundraising Continues to Slide in 2011 Q3

Really, it isn’t any wonder. Venture capital’s fundraising scene is all of a sudden totally crappy again. And it’s not just as bad as it was during the recession’s nadir—it’s even worse.

We can’t say we didn’t see it coming. A paltry $1.72 billion was raised by GPs in the third quarter of 2011, which was a 53% year over year decrease in dollar commitments compared to the same quarter and marked the lowest dollar amount raised in a quarter since the third quarter of 2003, eight years prior, according to data gathered by the National Venture Capital Association and Thomson Reuters (also the publisher of this blog).

NVCA President Mark Heesen attributed the drop in fundraising to a lack of exits, and LPs’ confidence in the asset class being jolted by a halt in redemptions that came with the IPO window’s closure about eight weeks ago. Other issues weighing on LPs minds, Heesen said, include the unresolved US federal budget debate that must be addressed in Washington in coming weeks, and sovereign debt issues that continue to hamper the European Union.

“Everyone is waiting to see what will happen in the next month-and-a-half,” he told peHUB.

There were limited IPOs in the third quarter, Heesen noted, although, two are planned for the coming weeks.

Of course, there are quite a few silver linings to the NVCA’s report. The primary grain of salt that should be taken with the data released Monday morning is that the third quarter of 2011 was characterized by a turbulent global market, far worse than either of the prior quarters this year. This, most of peHUB’s readers said, made the fundraising market that much more difficult to navigate.

Another positive from this year’s full fundraising figures, despite the drastic drop-off, is that GPs can chalk up some of the quarter’s paltry totals to the success the asset class had earlier this year. The $7.6 billion raised in the first quarter of 2011 was the asset class’ best fundraising performance in a decade, perhaps helping set the stage for a disappointing end of the year. VCs that successfully raised a billion dollars or greater earlier this year include Accel Partners, Bessemer Venture Partners, and Sequoia Capital.

Are YOU raising a fund? Time’s running out to close it in 2011. Probably best to come visit Thomson Reuters’ Venture Alpha, next week, Oct. 20, in San Francisco.