NESTA reports venture capital decline

The number of exits has fallen by 40 per cent and fundraising dropped by more than 50 per cent both in terms of the number of funds raising new capital and total amounts raised.

‘Venture Capital: now and after the Dotcom Crash’ also compares today’s venture activity trends with the dotcom crash, and finds this crisis compounded by the challenges already facing technology entrepreneurs since 2002.

Two new trends are having a particular affect on today’s market. First, the time taken to successfully exit, through a flotation or takeover, is said to be getting longer. Globally, this averages almost seven-and-a-half years, the longest period seen over the past two decades. This global trend is reflected in the UK market and has a knock-on impact on a fund’s ability to attract further investment.

Second, both the dotcom and financial crises are said to have resulted in a significant reduction in the number of new venture capital funds established. However, current fundraising activity is considerably lower than levels seen after the dotcom crash and consequently the lowest level seen in the last decade.