Proving the only thing that has slowed more than venture capital deal making is venture capital fund raising, Venture Economics (publisher of Private Equity Week) and the National Venture Capital Association (NVCA) are expected to jointly release research today showing U.S.-based VC fund-raising totals at their lowest level in two years during the 2001 second quarter. Fund-of-funds results will not be included in this report.
According to preliminary figures, investors plied venture firms with approximately $9.839 billion between April and June of this year, off more than 32.86% from the previous quarter and nearly 68.5% from Q2 2000. The last time a quarterly take dropped below the $10 billion mark was in Q2 1999, when just over $9.276 billion was raised.
Investors in Q2 2001 also got more picky with who they would give their money to, with just 66 venture firms receiving new capital. That figure is meager, considering that limited partners showered monetary affection down on 181 firms over the same period last year. Moreover, it is the fewest number of firms to receive capital since 47 firms hit pay dirt in Q3 1997.
Despite the doom and gloom, however, some domestic VCs did manage to navigate the treacherous fund-raising waters. Most notable were a pair of Boston-based firms ? Matrix Partners and Greylock ? which both managed to hit the increasingly elusive $1 billion mark. Matrix Partners, which raised its fund in just three weeks, will use its seventh fund as a follow-up to the $500 million it secured for Matrix Partners VI in 2000. Greylock XI is also a follow-up to a 2000 fund, the $525 million Greylock X.
Other big winners included Atlas Venture securing $950 million for Atlas Venture VI, Insight Venture Partners netting $750 million for Insight Capital Partners IV and Foundation Capital, which raised $595 million for Foundation Capital IV.
Private Equity Pitfalls
Fund-raising results for Q2 2001 within the broader U.S.-based private equity market weren?t any better than the pure-VC numbers.
Private equity funds ? a category that incorporates buyout, venture capital and hybrid vehicles ? raised just over $19.267 billion in the second quarter, a 29.57% drop from the previous quarter. Moreover, it is the lowest total private equity take since Q1 1998, while the 92 firms that raised capital last quarter were the fewest since just 76 firms enticed limited partners back in the third quarter of 1997.
Moreover, that number becomes even more pallid considering that a full quarter of that total came from just one firm: Kohlberg, Kravis, Roberts & Co.?s (KKR), which nabbed $4.9 billion for its Millennium Fund.
Although no one matched KKR?s prowess, Credit Suisse First Boston was able to take second place among non-venture firms with $800 million for its $1.5 billion-targeted CSFB Global Opportunities Fund.
Heading To Higher Ground
The prospects for third quarter results don?t look terribly promising at this point, although Highland Capital Partners (HCP) was able to wrap up its $808.08 million sixth fund last week. Included in that total is an entrepreneur?s fund of under $100 million. Highland VI is a follow-up to last year?s $505 million Fund V, which still has some dry powder left to support existing portfolio companies and to bring a few more new ones into the fold, such as an optical subsystem provider that HCP expects to announce in its investment in next week. Fund VI will likely begin spending its newfound capital in the fourth quarter.
Contact Dan Primack: Daniel.Primack@tfn.com