Over the past year, I’ve described the dismal state of VC and the problems this industry has had raising new funds. Certainly, these issues have been widely reported and discussed elsewhere.
But there are real numbers to back up all of this anecdotal evidence. Here’s an analysis of my database of 274 VC funds raised (or being raised) from 183 different venture partnerships. All of these funds target investments in life science companies, at least partially.
The number of fund closes has held constant from last year to 2009, although the fund size has decreased slightly. General partners are still willing to close funds before reaching their goal size, although other strategies are now emerging. For example, GPs are re-opening previously closed funds (sometimes called “sidecars”) or even giving up on raising a new fund altogether. Most importantly, there seems to be a fairly large number of funds stuck in perpetual fund-raising mode even though they aren’t evergreen.
I looked at fundraising success as measured by amount actually raised as a percentage of the partners’ originally stated fundraising goal. I compared results for VC firms with an office in Massachusetts, an office in the United States (but none in Mass.), and offices outside of the U.S. I also broke the data down by whether “medical devices” are one of the stated areas of investment for that fund. To provide perspective, I have compared the results for 2009 vintage funds with those that closed in 2008. All of my data come from publically available sources, such as the NVCA, VentureWire and peHUB.
Of the 41 funds in my database with a 2009 vintage, nine specifically mention medical devices as an area of investing interest. At 22 percent of the total, this is double the percentage with medical device interest for 2008.
In terms of location of offices, five have a presence in Massachusetts (5AM Ventures, Excel Venture Management, Highland Capital, Venrock, and Village Ventures), 31 have U.S. offices outside of MA, and five are OUS. These numbers are virtually identical to the 2008 vintage funds.
The overall average raise was $244 million, with a low of $1.6 million (Mobius Life Sciences I) and a high of $1.2 billion (Norwest Venture Partners XI). This average was down $6 million from last year and the smaller size of funds is expected to continue, according to an NVCA survey completed this month.
A total of 11 funds closed below their originally-stated fundraising goals, five over-raised and five closed at their stated goal. I could not find publically-stated fundraising goals for the remaining funds. For the 21 funds with complete data, the average goal was $252 million, but the average raise was actually $224 million. This success rate of 89 percent of their goal fund size compares with 78 percent for 2008 vintage funds. For the nine partnerships that plan to invest in medical devices, one over-raised, six under-raised, one met their goal and I don’t have data for the other one. For the five partnerships with a Mass. office, one over-raised, one under-raised, one met their goal and the goal was not disclosed for the other two.
Six partnerships gave up raising at least one fund in 2009, including four with Mass. offices (Prism Ventureworks, Velocity Equity, Venture Capital Fund of NE and Village Ventures) and one that had planned to invest in medical devices (Trevi Health Ventures II). None chose this pathway in 2008.
Interestingly, four previously-closed funds (one with a 2005 vintage, one with a 2007 vintage and two with a 2008 vintage) were re-opened (perhaps so that the partners would avoid having to raise a new fund). Finally, 38 funds that were fundraising in 2008 had not closed nor officially given up fundraising by the end of 2009. It isn’t certain how active these GPs remain in fundraising for this large bolus of VC funds that remain in limbo.
