“If we really believe that there are fundamental structural problems in the venture industry, should we raise our fund and just hope that the problems will get better?” the firm wrote. The answer was no.

Many venture capitalists have voiced similar concerns for some time. And over the last few years, many firms have turned away far more money than they raised.

But investors, perhaps hoping for a repeat of the eye-popping returns of the late 1990’s, have continued to put money into venture firms. At the end of 2005, venture capitalists had a combined $261 billion under management, more than at any time in the industry’s history, though some of it was raised in the Internet boom.

Venture capitalists have given back money to investors before, most significantly after the Internet bubble burst and the appetite for investing in risky technology start-up companies nearly vanished. But experts say this is the first time that a top-tier firm has decided to scrap a sizable fund that was nearly complete.

“I don’t know of any other firm that has gone through that process,” said Mark Heesen, president of the National Venture Capital Association, an industry group.

In many ways, Sevin Rosen’s decision is based not on where the market for public offerings and acquisitions is today, but on where the partners in the firm think it will be in five or more years, the typical life of a venture fund. While Sevin Rosen has concluded that things are unlikely to change, many others disagree, Mr. Heesen said.

“That’s where the real debate is, and I can see V.C.’s on both sides of that debate,” he said.

Indeed, even as they say they wish there was less money in the business, and hence less competition for deals, many venture capitalists say they remain confident about their ability to make money for their investors.