For PE & VC Fundraising, US Up and Europe Down

(April 11, 2011) — The United States has enjoyed a robust private equity and venture capital fundraising environment, whereas the European market has not enjoyed similarly strong gains, according to the latest figures from Dow Jones.

“In 2010, many private equity firms focused on trying to return capital and those efforts are starting to bring their investors back to the party,” Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst, said in a statement. “But limited partners are still like bouncers at an exclusive night club. They’re only letting the best looking groups behind the velvet rope. Everyone else still has to struggle for their attention.”

Dow Jones figures revealed that private equity funds in the US secured $31.6 billion for 89 funds during the first quarter, more than double the $13.5 billion raised for 81 funds during the same period last year. Meanwhile, the data showed that while European firms collected $8.2 billion during the quarter, up 39% from the $5.9 billion raised a year earlier, the number of closings declined to 22 from 32.

Meanwhile in the venture capital space, which has struggled to regain its peaks from the late 1990s and early 2000s, Dow Jones found that venture capital funds in the US raised $7.7 billion in the first quarter of 2011, nearly doubling the $3.9 billion raised in the same period last year and the highest first-quarter total since 2001. European venture firms, on the other hand, raised $653 million for five funds during the first quarter, down from $1.3 billion raised for 13 funds during the same period in 2010.

“The first quarter’s fundraising numbers show that established firms without major blemishes can still raise large funds while others face a tough sell,” said Scott Austin, editor of Dow Jones VentureWire, in a release. “With some of the larger US venture funds closed and the industry with more than half the 2010 fund-raising total already in its pocket, the next couple of quarters will tell us if limited partners hit their spending limit for venture funds or will continue to commit capital to the asset class.”

Thomson Reuters and the National Venture Capital Association (NVCA) has revealed a similar assessment of the venture capital environment, reporting that the US venture-capital industry had its best fundraising start since 2001. The data showed that 36 US venture-capital funds raised more than $7 billion in the first quarter of 2011, compared with the first quarter of 2010, which saw 44 funds raise $4 billion. According to its research, the first quarter was the strongest for US venture-capital fund raising since the third quarter of 2008 and the best annual start for fund raising in the US since 2001.

Nevertheless, Mark Heesen, NVCA president, warned that the amount of money raised was mostly driven by larger, established funds. “This year will be a defining one as many venture-capital firms will be fundraising, some of whom have been waiting for the investor climate to improve before going out,” Mark Heesen, president of the NVCA, said in a statement.

The findings contrast with an earlier report from last year by Cambridge Associates and the NVCA that showed venture capital 10-year returns — considered the most important measurement of the industry — were negative 3.7% for the period ending March 31, 2010. The report showed that despite slight improvement in initial public offerings and mergers and acquisitions, the venture capital industry is still shaky. However, Peter Mooradian of Cambridge Associates noted in July that he believed the 10-year returns may have bottomed out.

“We continue to see a decline in the 10-year return number but believe it will bottom-out in the mid-negative single digits over the next two quarters,” Mooradian said last year in a release. “Sustained improvement in the exit markets should result in the figure returning to break-even or modestly positive territory in the second half of 2011.”