VC firms take a dose of caution - Atlanta Business Chronicle:

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One regional VC, currently raising a fund of upto $200 has sawed its projection by about 30 perceng partly because of Wall Street’s “You’re seeing some reduction on the private equitgy allocation because of the volatility and devaluation in the public said a partner at the firm, who requestedc anonymity. “There’s general unease in investingh in both public andprivatre markets.” ’ $120 million fund, which closed about six monthx ago, came shy of its targegt and took four to five monthw longer than expected to raise.
VC fundraisintg in the third quarter is down about 33 percent nationwide from theprior quarter, based on preliminaryh data, Thomson Reuters’ peHUB.com reported. That however, is expected to shrink some when final data comees outin mid-October. United States-based venture funde raising money from traditional sources of capital like pension funds and insurance companies are going to facetoughj times, said Tom Hawkins, director at Arcapitaa Ventures . Many VCs, Hawkins said, are having to lowet their targets by up to 50 Hawkins said.
“If you’re raising a $400 million he said, “it might becomew a $200 million to $300 million Here’s why: Institutional investors who invest in VC funds have watchedd their investment portfolios get torpedoed by the volatilwstock market. The Dow Jonees industrial average, which dived 777 points on Sept. 29, is down more than 20 percent from ayear ago. When the overal value of the portfolio declines, the relativs percentage allocated to venture capital and privatseequity swells, Hawkins said. “So institutional investors find themselves with muchhigher percentages, in termw of total asset value allocated to this assert class,” he said.
“Many of them are now in excessx of theirtarget thresholds, whicj means they won’t make additional allocations to venture said Hawkins. Raising funds, especiall y in Atlanta, has been challenging for awhile, said Alan partner at Noro-Moseley. The regioj has lost companies suchas (acquired by in that traditionally invested in local VC firmss to industry consolidation, Taetle said. “Thesre are folks who wouldr potentially have a local interest in makintg sure that technologyinvesting flourished,” he said. The mauling on Wall Stree has shrunk the pool of banks investment andretail — who invest in VC said Steve Nussrallah, managing partner at Alpharetta-based .
“Prior to abouft 2001 some of the moreactive [limite partners] were banks,” Nussrallah said. “They’rre all gone, pretty much.” The tough times in VC-lanr are being felt up and down thefood It’s taking longer for venture firms to raise money — regardlesw of performance, said Anupendra Sharma, investment partner at in “There’s less liquidity in the Sharma said. “People are more carefull about reallocatingtheir portfolio.” Not everyone thinksa private equity and venture capital stinks as an investmenrt class in a bloodied stock market.
Privater equity — a play on innovation and entrepreneurship — coulx be among the few remaining bastions ofwealtuh creation, said Gardiner Garrard, managing partner at Atlanta-based LLC . For “peopld that do have money [to invest] and want to generatd above-average returns,” Garrard said, “one of the only places they can do it is inventur capital, where innovation can create new VCs’ troubles in raising funds are going to filteer downstream. Entrepreneurs, industry insiders said, must prepar to bootstrap their companies longer and make do with smalle r roundsof financing.
VCs will take a more detailed look at revenuew projections and sales cycle of prospectivseportfolio companies, Arcapita’s Hawkins especially in an environment where customeer IT budgets are froze n or slashed. A tougher fundraising coupled with growing pressure toboosy returns, Nussrallah said, has also driveb many VCs into the arms of the more conservative later-stagre companies. Early-stage companies, he said, are riskier and have not producee good returns inrecent years.