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VC Industry Continues Consolidation in 2011

Mark Marich

According to the latest figures from the National Venture Capital Association, dollars invested are on the rise while the number of funds continues to fall. In the US, thirty-eight (38) venture capital funds raised $5.6 billion in the fourth quarter of 2011—representing an increase of 162% in commitments. While the total number of funds for 2011 held constant in comparison to 2010 totals, the fourth quarter total of 38 marks a low point since the third quarter of 2009.

“This past year we saw more venture capital money raised by essentially the same number of firms, a sign that consolidation within the industry is continuing,” said Mark Heesen, president of NVCA. “We also continued to invest more money in companies than we raised from our investors. Both of these trends – if they continue -- suggest that the level and breadth of venture investment is starting to recalibrate to reflect a concentration of capital in the hands of fewer investors. Our cottage industry is indeed getting smaller still and that will impact the startup ecosystem over time.”

Meanwhile, NVCA also reported recently that despite a fourth quarter rally, a similar scenario was taking place with venture-backed IPOs. For 2011, 52 venture-backed companies went public representing a value of $9.9 billion—a 31% decrease in volume by a 41% increase in dollar value from the previous year. Seventy-five percent of those companies were based in the US and not surprisingly, a majority of those came from California.

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