• Forbes, Tuesday, January 20, 2009 1 PM

U.S. venture capital fund raising fell 71% in the fourth quarter, thanks to a decreasing appetite for risk by large institutional investors, Forbes reports. New data from the National Venture Capital Association and Thomson Reuters shows that venture capitalists raised just $3.4 billion in the fourth quarter, compared with $11.7 billion a year ago. For the full year, U.S. VCs raised a little under $28 billion, down 21.4% from the $35.5 billion raised in 2007.

Venture capitalists use the money, which is supplied by large investors like pension funds, university endowments and charitable foundations, to make bets on small companies, mainly in fields like medicine and technology.

Mark Heesen, the venture capital association's president, attributed the sharp drop off to the recession. He said firms that planned to raise new funding either late last year or early this year are holding off "until economic conditions improve and institutional investors can recommit with confidence," Heesen said in a statement, adding that some firms that raised big funds over the last few years are still busy investing that money, while others have been hurt by increasingly risk-averse investors. Forbes notes that median returns for VC funds over the last several years have been "dismal."

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