Money sent to venture capital slowed in Q3

Kevinjeon00 | Getty Images. Hunker down, because winter is coming, venture capitalists say.·CNBC
Anita Balakrishnan
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U.S. venture capital firms saw a steep decline in funds raised in the third quarter, according to a report released Wednesday.

VCs saw a 34 percent decrease in funds raised from the second to the third quarter of 2015, and a 59 percent decrease by dollar commitments, said a fundraising report by Thomson Reuters and the National Venture Capital Association (NVCA), which sampled 53 U.S.-based venture capital funds. The $4.4 billion total raised in the third quarter was a 33 percent year-on-year drop, and marked the slowest three-month period for venture capital fundraising since the third quarter of 2013, the report said.

A main artery for the flow of capital to mid- to late-stage start-ups, venture capital funds raised $10 billion in the second quarter of 2015 and $30 billion total in 2014, the report said. The mythological "unicorn start-up" was buoyed along with the rising tide of venture capital: There are now 140 start-ups with private valuations of more than $1 billion, according to researchers at CB Insights, most of which were added in 2014 and 2015.

The third-quarter slowdown comes against a backdrop of global volatility in several countries and sectors. The major stock market averages closed about 7 percent lower for the third quarter, their worst since 2011.

A gauge of venture capital confidence hit a two-year low in August, as industry insiders like Benchmark's Bill Gurley, Founders Fund's Geoff Lewis and Chamath Palihapitiya of The Social+Capital Partnership predicted more sparse venture capital in years to come.

In spite of limping off a 15-year high in venture capital spending, the $4.4 billion raised in the third quarter still has the potential to revolutionize entrenched industries, said Bobby Franklin, president and CEO of NVCA.

"Despite being down from the recent high-water mark recorded during the second quarter, total fundraising for the year remains quite strong and has already surpassed annual fundraising marks observed in recent years," Franklin said in a statement.

— CNBC's Evelyn Cheng contributed to this report.



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