VC funding falls 35% in the US but local outlook still positive

Venture capital fundraising in the United States fell 35% in the first quarter of 2012, according to the National Venture Capital Association, but an expert insists investment is as strong as ever.

Data from the NVCA and Thomson Reuters shows US venture capital funds raised US$4.9 billion in the first quarter of 2012, down 9% from the number of funds in the first quarter of 2011.

The top five funds accounted for 75% of total fundraising in the quarter, with California-based venture capital firm Andreessen Horowitz laying claim to $1.5 billion.

“The first quarter fundraising numbers represent a slower start than last year,” NCVA president Mark Heesen said in a statement.

“[However,] venture firms appear to be more optimistic about the fundraising environment in 2012.”

“Many venture firms are either now officially in the market to raise a fund or will enter in 2012. “For these firms, it will be do or die.”

“The collective outcome of their fundraising efforts will lay the groundwork for the amount of venture capital available for investment in entrepreneurial companies [over] the next decade.”

According to Sydney-born Haig Kayserian, chief executive of New York-based angel fund Kayweb Angels, there are still plenty of opportunities for local start-ups to raise funds in the US.

“Quality incubators continue to expand operations in the United States, while VCs and angel investors will continue to invest in the technology space,” Kayserian told StartupSmart.

“This reality will continue, and I can say this firsthand as Kayweb Angels will expand our operations in 2012.”

“I would more than welcome Aussies applying to Kayweb Angels for investment in projects that can prosper in the US.”

While New York is rising through the ranks as a hotbed for start-ups, a new report shows California continues to lead the way when it comes to landing venture capital investment.

The report comes from the NVCA and PricewaterhouseCoopers.

Last year, California attracted more venture capital than any other US state, pulling in almost five times as much money ($14.5 billion) as Massachusetts, which ranked second ($3 billion).

Massachusetts was followed by New York ($2.3 billion), Texas ($1.5 billion) and Illinois.

Silicon Valley veteran David Scott Carlick is the co-founder of online advertising company DoubleClick, which was sold to Google for $US3.1 billion in 2007.

According to Carlick, start-ups struggle to succeed without technical know-how, regardless of where they are.

“One pet peeve I run into is start-ups that don’t have technologists as part of their core being,” Carlick says.

“We get people in the media or marketing business that have a good idea, and think they can hire the technology. It’s very difficult for those folks to be competitive.”

“The biggest mistake is not having technical brilliance at your core.”