Venture Capital Funds Achieve 41% Growth in Q1 2010 Amidst Private Equity Slump
Posted by on April 9th, 2010 View Comments
Posted in Corporate Development |
Venture capital funds in the United States have performed better during the first quarter of 2010. U.S. venture capital funds raised $4.1 billion from 34 funds during the initial three months of the year. According to the data collected by Dow Jones LP Source, the graph below shows a 41% growth from the $2.9 billion generated from 25 funds during the same time-span of 2009, as posted in VentureBeat.
The two biggest closes in venture capital funds for the first quarter of 2010 came from Oaktree Capital Management LP, which made a $1.8 billion close for its OCM Principal Opportunities Fund V LP fund and a $952 million close for its OCM Mezzanine Fund III LP Fund.
Seventeen multi-stage funds accumulated $3.1 billion during the first quarter of the year. This is 76% of the venture capital raised by the venture industry in the most recent quarter and more than double the amount accumulated during the same period last year. Early-stage funds came to a distant second with $605 million raised by 16 funds in the first quarter. It was down 36% from the same period last year. One later-stage fund closed at $400 million, down 17% from Q1 2009. The recent development suggests a positive preview of the things to come this year for established venture capital funds and their portfolio companies. The venture capital industry is just coming off a 6-year fundraising low in 2009.
The venture funds were down 53% last year, significantly less than the 68% overall drop experienced by private capital.
(Photo credit: VentureBeat)
According to Jennifer Rossa, managing editor and a Dow Jones Private Equity Analyst, there is a transition happening in venture funds. Multi-stage funds are now lapping early-stage funds because of a strong uptick in liquidity this year, compared when early-stage funds are were performing much better during the previous year since capital was tight as the country was recovering from the financial crisis.
“Limited partners are hedging their bets by choosing multi-stage funds… They are reluctant to dive too heavily into early-stage funds which can take longer to produce returns or later-stage funds which will remain unattractive until the liquidity markets hit their stride again.”
On the other hand, the overall private equity spectrum in the United States that includes venture funds has not performed well, as private equity fund-raising dropped 8% to $17.6 billion (which was raised by 97 funds) during the first quarter of the year from the $19.1 billion (raised by 75 funds) during the same period of 2009. The further drop in private equity this year is surely not a good sign of things, since last year was considered the most miserable year for private equity fund-raising in the United States since 2003. The overall private equity dropped drastically from the $65.9 billion raised by 108 funds during the first quarter of 2008 — a clear indication of how hard the industry has been affected by the financial crisis and credit crunch.
