VC fund-raising haul is the biggest in 4 years: TCV’s $1.4B fund is the largest among VC firms

Few predicted that 2005 would be as big a fund-raising year as 2004, but the final tally shows that it eclipsed its predecessor by a significant margin and was the biggest year for fund-raising since 2001.

A total of 205 U.S.-based venture funds raised about $25 billion in 2005, up from the $17.8 billion that 235 funds raised in 2004, according to preliminary data from Thomson Financial (publisher of PE Week) and the National Venture Capital Association. The amount raised in 2005 is the highest it has been in four years, although they it is considerably less than the record-setting year of 2000, when 635 funds raised $106 billion.

On the buyouts side, 2005 fund-raising hit an all-time high and the haul was more than four times larger than the previous year (see story, page 8). U.S.-based buyout funds pulled in $173.5 billion last year, compared to $42 billion in 2004. “This was the largest fund-raising year, maybe ever,” says Kelly DePonte, a partner at placement agency Probitas Partners.

The VC fund numbers could have been far higher, but many firms turned down millions of dollars from LPS to keep their funds at a manageable size. At least they tried to, unlike in some past years. For example, Lightspeed Venture Partners has said of its seventh fund – which closed with $475 million in November – that its original target was $400 million. (The new fund was still considerably smaller than Lightspeed’s previous fund, a $1 billion behemoth that closed in 2002.)

Of course, it takes just a few funds to raise the average for everyone else. Technology Crossover Ventures raised the largest fund of the year. After tearing through its $900 million vintage 2004 fund, it raised a new fund of $1.4 billion last year. This despite the fact that Founding General Partner Jay Hoag said that TCV didn’t actively market the new fund.

Familiar faces led many of the new, more manageable funds that emerged last year. Among the long list of established VCs who debuted new funds were former Mayfield general partners Todd Brooks and Peter Levine, who set out to raise $200 million for their inaugural software-focused fund in the fall. Though still under wraps publicly, LPs were ecstatic to have them back.

LPs were just as feverish over Boston-based Spark Capital, whose team is comprised of former partners of Charles River Ventures (CRV), Battery Ventures and Constellation Ventures. Limited partners committed $260 million to Spark to identify and fund early stage media and entertainment startups. Co-founder and General Partner Santo Politi, formerly a GP at CRV, reportedly said that the fund was “way oversubscribed.”

Another familiar emerging managers of 2005 was the seven founding partners of New Leaf Venture Partners, which closed its $310 million inaugural fund in early August. All worked together as former managers of the Sprout Group’s health care technology portfolio.

Additional reporting from Mark Cecil, Buyouts.