Private equity fundraising had another very strong showing in the first quarter of the year with ninety-three funds raising a combined $31.4 billion, according to Thomson Venture Economics and the National Venture Capital Association (NVCA).
Fifty-one venture funds accounted for $6.5 billion of the total while forty-two buyout vehicles raised $24.9 billion. While these figures show a decline from the fourth quarter, they are a significant increase over the first quarter of 2005.
“For the venture capital community, this year will be the last in the typical three year fundraising cycle,” said Mark Heesen, president of the NVCA. “If venture firms continue along the current path of reason, we would expect to see a gradual leveling off of commitments in early 2007. First quarter fundraising was again robust but still within a prudent range. We have exhibited tremendous discipline in this cycle and that will serve our limited partners well.”
Venture dollars raised in the first quarter declined by 13.1% over the fourth quarter when sixty-three funds attracted $7.5 billion, but gained by 21.2% over the first quarter of last year when fifty-nine funds took in $5.4 billion. On the buyout side the respective differences were more pronounced. This quarter’s $24.9 billion represents a 22.1% fall off from last quarter’s $31.9 billion, the largest amount of money ever raised by buyout funds in a quarter. However, this quarter outpaced by 76.8% the first quarter of 2005 when forty-nine funds raised $14 billion.
On the venture side, Early Stage funds continued to attract the majority of commitments with twenty-three funds raising $3.4 billion or 52.8% of the total venture figure. Balanced funds ranked second in dollars, raising twenty-one funds and $2.6 billion or 39.8%. All other fund types raised $478.8 million among 7 vehicles, accounting for the remaining 7.3%.
The largest venture funds raised in the quarter were Polaris Venture Partners V which was capped at $1 billion, and Highland Capital Partners VII which closed on $800 million. Kleiner Perkins also raised $800 million in the quarter, but its commitments were split between the $600 million KPCB XII and the $200 million KPCB Pandemic and Bio Defense Fund.
On the buyout side four mega funds accounted for $14.8 billion of the quarter’s total including Bain Capital IX at $8 billion. TA Associates raised just over $4 billion in two funds – TA X, L.P. raised $3.5 billion while TA Subordinated Debt Fund II raised $775 million. Other mega funds raised were ArcLight II with $2.1 billion and GS Mezzanine Partners 2006 with $1.25 billion.
Daniel Benkert, senior analyst at Thomson Financial said, “Buyout firms continue to raise funds at a remarkable pace, absorbing what appears to be a very strong investor demand for alternative asset classes. Buyout funds have historically raised 2-3 times more dollars than venture funds. However, we are now seeing that number creep up to 4 times as much. And with several other mega buyout funds in the process of raising commitments with a combined target of well over $40 billion, the year ahead looks to be a repeat of last year. Time will tell as to whether there are enough opportunities to put that money to work in a manner that generates the returns that investors are expecting.”