Venture fund-raising ticks up in Q2

Venture firms raised capital at a healthy pace in the second quarter, despite turbulence in the broader economy, with fund-raising boosted by limited partner demand for growth and later stage vehicles.

In all, 59 North American firms closed 63 funds totaling $9 billion in the second quarter, based on preliminary data from Thomson Reuters, publisher of PE Week. (Thomson Reuters and the National Venture Capital Association are expected to release a more definitive Q2 fund-raising report later this month.)

In the last quarter, the firms that raised the largest funds were Kleiner Perkins Caufield & Byers, Lightspeed Venture Partners and Foundation Capital.

Fund-raising levels were up in comparison with Q1, in which 57 venture funds raised $6.3 billion. The Q2 numbers also marked an increase from the second quarter of 2007, during which 67 funds raised about $6.7 billion.

Kelly DePonte, partner at San Francisco-based placement agency Probitas Partners, says that a high number of funds that closed in Q2 “had been on the market for a while.” He predicts a more difficult road ahead for fund-raising, particularly for new managers and first-time funds.

“The climate is getting rougher, and a lot of that is being driven by the public stock market,” he says. “As their overall portfolio values fall, people are feeling a lot more squeezed.”

Clean technology funds continued to draw commitments in the second quarter. Boston-based Rockport Capital closed a fund of nearly $450 million in June that will focus on cleantech.

Foundation, which closed a $750 million sixth fund in April, announced that it will allocate roughly $250 million of that total to expanding the firm’s 5-year-old cleantech practice. And in May, Kleiner Perkins launched a $500 million Green Growth Fund, which will focus on scaling cleantech businesses.

Meanwhile, The Westly Group, a cleantech firm launched by former California Controller Steve Westly last year, is closing in on a second fund totaling $130 million. As of mid-June, the Menlo Park, Calif.-based firm had locked down $79 million, and it is expected to close the fund in August.

A number of early stage funds also held closings last quarter. Lightspeed, which closed an $800 million fund in May, said will continue to focus on seed and early stage startups, especially in the United States and Israel.

Other early stage funds that raised capital in Q2 include Madrona Venture Capital Group (which raised a $250 million fund) and Foundation (which raised $750 million).

But don’t expect the early stage to be dominating the fund-raising environment in the future, says DePonte, who notes: “The venture market is becoming on an overall basis, a lot later.”