A recent report released by the National Venture Capital Association and Thompson Reuters shows that the rate of venture fundraising continues to slow.

This statistic measures the amount of money raised by VC firms from their limited partner investors. The report states that 43 VC funds raised $3.4 billion in the Q4 2008. This is a steep decline from both Q3 2008, in which $8.4 billion was raised, as well as the fourth quarter of 2007, during which funds raised $11.7 billion.

For the full year in 2008, 211 VC funds raised a total of $28.0 billion, a 21.4% decrease in volume from 2007.

At first glance, this might not look too bad given the percentage losses and declines in valuation, in the economy generally and the tech sector. However, the drop in Q4 is so drastic that if it proves a sign of things to come, it could signal a real tightening of VC funds available to venture-backed companies and those seeking their first venture investment.

Similarly, the number of VC funds raising money in Q$ 2008, 43, is by far the lowest in recent history. In contrast, 62 funds raised money in Q3, and 84 closed funding rounds in the 4^th quarter of 2007.

Finally, the average raise of approximately $78,000,000 is significantly lower than either Q3 2008 (around $135,500,000) or the fourth quarter of 2007 (about $139,000,000).

One reason for the decline (other than less money generally being available to deploy) may be that the pension funds, family funds, and other typical institutional VC investors often have asset allocation targets for their investments, with no more than a pre-determined percentage intended to be in venture investments at any given time. As has been reported, some of these investors have faced significant declines in other sectors of their portfolios. These declines have in turn caused the VC portion to jump to a disproportionately large percentage of overall holdings, prompting cutbacks there as well.  As illogical as this reasoning might seem on one level, the statistics on VC fundraising speak for themselves.