Venrock raises small $350 million fund

Nearly half as large as last fund, new capital to be directed at startups that really need it

 Pioneering venture capital firm Venrock has raised a new, smaller fund, $350 million, to continue its investments in early-stage technology, healthcare, and energy companies.

In 2007, the firm had raised $600 million, nearly double the latest fund. Curiously enough, it wasn't hard times nor niggardly investors that kept the fund total down, but rather Venrock's very own will.

“We didn’t go out and just take in as much money as we possibly could,” said Bryan Roberts, a partner at Venrock. “Venture investing’s hard, and scaling it is hard. That’s one of the issues a lot of venture capitalists got into in the last decade."

To match the shrunk fund, the number of partners investing at Venrock has fallen to 8 from 15.

We might not think the firm's shrinking fund very notable, considering that it merely follows recent trends in the VC world. After all, just 32 firms raised $3.6 billion in the first quarter of 2010, a serious drop from the $5.3 billion raised by 57 firms in the first quarter of 2009, according to the National Venture Capital Association. But what's most surprising is Venrock's volunteering to keep the fund to a minimum, despite having more potential partners willing to invest.

And it's not like Venrock's investments are fruitless. The firm's most recent successes include the $325 million acquisition of enterprise security company PGP Corporation by Symantec, as well as three IPOs--Alimera Sciences, AVEO Pharmaceuticals and Ironwood Pharmaceuticals.

In the end, firms with the same line of thought as Venrock--Andreessen Horowitz, Greycroft Partners and Union Square Ventures--believe that smaller funds prevent hasty investments in startups that don't really need the capital. With less money to throw around, Venrock can focus on smaller, early-stage startup that truly need the financial support.