Norwest closes $1.2 billion fund; is there light at the end of the tunnel?
In a continued run of positive news for the emerging company, venture capital industry over the last few weeks, Norwest Venture Partners just announced that it closed a $1.2 billion fund to invest globally in private companies across a number of industry sectors. Norwest's new fund is particularly impressive considering that the entire venture capital community only raised $1.7 billion in new or follow-on funds in the third quarter of 2009, according to the National Venture Capital Association and Thomson Reuters. The Q3 results marked the second consecutive quarterly decline in terms of the total number of venture funds raising capital and aggregate dollars raised by those funds.
We obviously don't want to get ahead of ourselves with optimism. A few lucrative exits and a massive raise by a Silicon Valley stalwart doesn't necessarily mean that the industry is poised for a turnaround. It is certainly the case that the two are not related, as Norwest has likely been working on this raise for months. Yet, the timing couldn't be better, in my opinion, because it feels like momentum is beginning to swell. The emerging company, venture capital industry is very circular in nature. Increased exit opportunities enable funds to raise additional capital from existing and new limited partners. As those cash coffers grow, more and more private companies receive funding, which will help the newly funded companies grow into attractive exit candidates. Wash, rinse, repeat.
Are we in the midst of a turnaround? We'll all know soon enough.
