There's some disheartening news this week about the venture capital industry: U.S.-based private equity firms raised a mere $25 billion in the third quarter. It's a 70% drop from this time last year and it's trickle-down effect may impact startups for years to come.

The news is hardly surprising since the financial picture for equity firms has been bleak all year. A total of $79.9 billion was raised during the first none months of 2009, down from $195 billion this time last year. Despite the decline, 26% of the total raised by buyout funds this year were from only two funds -- Hellman & Friedman LLC closed $8.8 billion and TA Associates XI LP capped out at $4 billion.


According to the Dow Jones Private Equity Analyst newsletter, venture capital fund-raising hasn't been this low since 2003. "The industry raised $8.0 billion across 83 funds so far this year, a 58% drop from the $18.9 billion raised by 141 funds at the same time last year. This marks the worst third quarter total for venture capital investment since 2003 when 53 funds raised $3.5 billion in the first nine months of the year."

The newsletter's managing editor Jennifer Rossa says, "Even as a boost in public markets provided some respite to limited partners? liquidity issues, many continue to give general partners the cold shoulder. Even as a boost in public markets provided some respite to limited partners? liquidity issues, many continue to give general partners the cold shoulder."

Flickr image courtesy of Howard Lake.



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