Venture capital fund raising drops 71 percent in Q4

PHILADELPHIA, Jan 19 (Reuters) - Forty-three venture capital funds raised $3.4 billion in the fourth quarter of 2008, marking a 71 percent drop from the prior year, according to data from Thomson Reuters and the National Venture Capital Association.

Venture capital firms had raised $11.7 billion in the fourth quarter of 2007, and $8.4 billion in the third quarter of 2008.

For full-year 2008, fundraising totaled $28.0 billion from 211 funds, a decrease of 21.4 percent from a year earlier. The fund-raising levels mirrored the volume in 2005, when $28.0 billion was raised, the data showed.

"The drop in venture capital fundraising activity in the fourth quarter is not surprising," said Mark Heesen, president of the NVCA.

"The market uncertainty has compelled firms that were planning to raise funds in late 2008 or early 2009 to hold back on fundraising efforts until economic conditions improve and institutional investors can recommit with confidence," he said.

Many firms also raised money in the last two years and were focused on deploying funds, Heesen added.

"With some notable exceptions, we can expect this slower pace to continue well into 2009," he said. (Reporting by Jessica Hall; editing by Gary Crosse) (For more M&A news and our DealZone blog, go to here)