Disappointed investors who threatened to abandon venture capital have carried through, sending the number of new funds tumbling and signalling a smaller industry with fewer venture capitalists. In the first three quarters of this year, only 86 US funds raised money, according to data compiled by the Venture Capital Journal and the National Venture Capital Association.
It the trend is maintained, by year's end there will be somewhere between 104 and 118 new funds. By comparison, even in the blackest days of the dot-com bust of 2001, investors averaged 234 funds a year. "You are going to see a reduction in the number of firms, but more important you will see a reduction in the number of venture capital professionals," Mark Heesen, president of the National Venture Capital Association, said in an interview. Venture capital firms stay in business by raising funds and investing the money over a period of five to 10 years to start-up companies.
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