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Venture capital fundraising activity continues at lower levels in Q1 2007
11/07/2007. Source:NVCA, Thomson Financial.
 Venture capital fundraising activity slowed in the first quarter of 2007 with fifty-six venture funds raising $4.9bn according to the National Venture Capital Association and Thomson Financial. While the first quarter saw a marked increase from the fourth quarter of 2006, venture fundraising during the first three months of 2007 was at the lowest level for an opening quarter since the first quarter of 2004.
"These lower fundraising levels relative to recent quarters are expected to remain steady in 2007 as many firms recently closed funds in the 2004-2006 cycle," said Mark Heesen, president of the NVCA. "Yet there will be a group of firms that choose to raise money in the 'off-cycle' which will keep overall quarterly levels in the $4-5 billion dollar range. Most firms that have raised money are keeping their fund sizes at reasonable levels which bodes well for the promise of future returns to limited partners."
Venture funds in the first quarter collectively raised 19.5% more than those in the fourth quarter of 2006, when fifty-six funds took in $4.1 billion in commitments. However, when compared to the first quarter of 2006, this quarter posted a 25.7% decline.
Venture fundraising by investment stage focus followed a familiar pattern in the quarter. Thirty-five early stage vehicles raised $2.6bn, or 53% of the quarter's entire venture commitment. Among these funds were Venrock Associates V at $528 million, which was the second largest venture fund raised in the quarter and Draper Fisher Jurveston Fund with $435 million.
"Illustrating the important role venture capital plays in promoting innovative companies, early stage vehicles continue to comprise the largest percentage of funds raised this quarter," said Alex Tan, Global Private Equity Research Manager at Thomson Financial.
Ten balanced funds raised $1.2 billion, led by MPM BioVentures IV with $550 million, the largest fund raised this quarter, and RRE Venture IV with $162 million. Seven later stage funds totaling $556.7 million and three expansion-focused funds with $431.5 million rounded out the quarter's numbers.
Follow-on funds continued to be raised to first time funds at an approximate 3-to-1 ratio. Only thirteen new funds were raised in the quarter, compared to forty-three follow-on entities.
The National Venture Capital Association represents approximately 480 venture capital and private equity firms. Their mission is to foster greater understanding of the importance of venture capital to the U.S. economy, and support entrepreneurial activity and innovation.
Thomson Financial is a provider of information and technology solutions to the worldwide financial community.
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