"The consistent and consecutive annual increases in venture capital fund levels reflect both an acceleration of the fundraising cycle as well as an increased need for capital within certain investment sectors," said Mark Heesen, president of the NVCA. "Venture firms are investing in many capital intensive industries such as life sciences and clean technology where the dollars required and time spent with the companies are both very high. As firms deploy capital faster they will have to go back out to the market sooner or raise larger funds. Still, on the positive side, we are nowhere near the unsustainable fundraising levels of the 1999 to 2001 period when the industry raised more than $200 billion."
In 2007, 112 early stage focused funds raised $9.7 billion, sixty-three balanced stage focused funds raised $10.6 billion, twenty-four later stage focused funds raised $7.2 billion, and twenty-two expansion focused funds raised $4.8 billion.
"While dollars raised in 2007 approached 2001 levels, the composition of these dollars based on fund stage focus stands in stark contrast to the composition seen in 2001," said Alex Tan, global manager for Private Equity Content Operations at Thomson Financial. "Today's composition consists of a broad diversification across early, balanced, later, and expansion focused funds, compared to the beginning of the decade when funds were focused almost exclusively on the early and balanced stages."
The ratio of follow-on to new funds was approximately 3-to-1 in 2007, compared to 2006 when the ratio was approximately 4-to-1. Fifty-five new funds were raised in 2007 compared to 180 follow-on entities.
The largest funds raised in the year were Technology Crossover Ventures VII, L.P. (later stage; $3.0 billion), Bessemer Venture Partners VII, L.P. (balanced stage, $1.3 billion), and Vector Capital IV, L.P. (expansion stage; $1.2 billion).
