Venture Capital Fundraising Levels Fall Below $1 Billion In First Quarter Of 2003

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  • 1. Contacts: Emily Mendell, The Wesier Group for NVCA, 610-359-9609, emendell@weisergroup.com Joshua Radler, Thomson Venture Economics, 973-353-7139, joshua.radler@tfn.com VENTURE CAPITAL FUNDRAISING LEVELS FALL BELOW $1 BILLION IN FIRST QUARTER OF 2003 Venture Capital Reserves Continue to Sustain Investments May 5, 2003 –Newark, NJ – Only twenty-two venture capital funds raised $996.1 million in Q1 2003 as the industry continued to draw on outstanding commitments to fund young companies, according to Thomson Venture Economics and the National Venture Capital Association (NVCA). The fundraising levels represent a significant drop in fundraising activity from the previous quarter, when 42 funds raised $1.7 billion. Taking into account firms that reduced their fund sizes in the first quarter, the net amount raised was $603.6M, a figure that has not been seen since Q3 1994 when the net amount totaled $403.9M. Industry experts expect fundraising activity to remain low for the foreseeable future as the venture capital industry steadily depletes its current reserves. Venture Capital Buyout & Mezzanine Year/Quarter # of Venture # of Buyout/ Funds Capital Funds Mezzanine ($ Millions) ($ Millions) 289 30,102.1 157 61,475.8 1998 451 61,166.9 152 57,245.1 1999 636 106,256.5 156 73,976.7 2000 291 38,369.4 117 44,243.8 2001 145 8,187.2 64 22,690.3 2002 22 996.1 13 1,049.8 2003 11 403.9 4 299.8 3Q'94 37 1,675.0 13 3,791.4 1Q'02 43 2,315.8 30 7,505.2 2Q'02 47 2,506.7 20 7,099.7 3Q'02 42 1,689.9 21 4,294.0 4Q'02 22 996.1 13 1,049.8 1Q'03 Source: Thomson Venture Economics & National Venture Capital Association * The figures above do not take into account downsized funds.
  • 2. The majority of the venture capital funds that did raise new capital were follow-on funds such as Intersouth Partners VI, L.P., Caduceus Private Investments II, L.P., and ARCH Venture Fund VI, L.P. Follow-on funds accounted for 72.7% of the total number of venture capital funds raised in the first quarter of 2003. The trend reflects a desire by many limited partners to place their assets with firms that have demonstrated a track record of success. However, first time funds with strong value propositions and investment focus were able to raise dollars as well. During the first quarter, new first-time funds, such as Quaker BioVentures Fund I, Lumina Ventures, L.P., and NeuroVentures Fund, L.P. successfully completed fundraising initiatives. New Venture Capital Funds vs Follow-on Funds No. of New No. of Follow-on 160 291 1999 238 398 2000 91 200 2001 12 25 Q1'02 12 31 Q2'02 14 33 Q3'02 9 33 Q4'02 6 16 Q1'03 Source: Thomson Venture Economics & National Venture Capital Association “It’s going to be a while before we see venture capital fundraising activity pick up,” said Mark Heesen, president of the National Venture Capital Association. “The venture industry currently has an $80 billion dollar overhang and we expect to see a significant portion of those reserves to be deployed prior to seeing a substantial increase in fundraising activity.” Similar to the venture capital trend, buyout and mezzanine funds also showed the same lower activity levels. While 21 buyout and mezzanine funds were raised in the fourth quarter of 2002 for a total of $4294M, only 13 buyout and mezzanine funds raised capital in the first quarter of 2003, totaling $1049.8M. The Sun Capital Partners III buyouts fund was responsible for almost half of this amount, accounting for $500M. The National Venture Capital Association (NVCA) represents over 470 venture capital and private equity organizations. NVCA's mission is to foster the understanding of the importance of venture capital to the vitality of the U.S. and global economies, to stimulate the flow of equity capital to emerging growth companies by representing the public policy interests of the venture capital and private equity communities at all levels of government, to maintain high professional standards, facilitate networking
  • 3. opportunities and to provide research data and professional development for its members. For more information visit www.nvca.org. Thomson Venture Economics, a Thomson Financial company, is the foremost information provider for equity professionals worldwide. Venture Economics offers an unparalleled range of products from directories to conferences, journals, newsletters, research reports, and the Venture Expert™ database. For over 35 years, Venture Economics has been tracking the venture capital and buyouts industry. Since 1961, it has been a recognized source for comprehensive analysis of investment activity and performance of the private equity industry. Venture Economics maintains a long-standing relationship within the private equity investment community, in-depth industry knowledge, and proprietary research techniques. Private equity managers and institutional investors alike consider Venture Economics information to be the industry standard. For more information about Venture Economics, please visit www.ventureeconomics.com. Thomson Financial Thomson Financial (www.thomsonfinancial.com), is a US$1.6 billion provider of information and technology solutions to the worldwide financial community. Through the widest range of products and services in the industry, Thomson Financial helps clients in more than 70 countries make better decisions, be more productive and achieve superior results. Thomson Financial is part of The Thomson Corporation (www.thomson.com), a leading provider of value-added information, software applications and tools to more than 20 million users in the fields of law, tax, accounting, financial services, higher education, reference information, corporate training and assessment, scientific research and healthcare. The Corporation reported 2001 revenues of US$7.2 billion and its common shares are listed on the New York and Toronto stock exchanges (NYSE: TOC; TSX: TOC). ###