Nearly $35 Billion in Venture Funds Raised in 2007—And Don’t Worry About A Bubble

1/14/08Follow @bbuderi

More venture funds. More money raised. And it’s not a bubble.

So reads the trifecta of good news about venture capital in 2007, as reported today by the National Venture Capital Association and Thomson Financial. All told, 235 U.S. venture firms raised $34.7 billion last year, marking the highest level of activity seen since the heady days of 2001, when 318 venture capital funds took in $38.8 billion.

The number of funds raising money in 2007 was just six (2.6 percent) more than a year earlier. However, the dollar value of those funds rose 9.4 percent, up from $31.7 billion in 2006. Last year marked the fourth straight year of increases in both the number of funds and the dollars raised.

“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,” NVCA president Mark Heesen said in a press release. Heesen citied venture investments in cost-intensive areas such as cleantech and life sciences as one reason for last year’s high fundraising figure. “As firms deploy capital faster they will have to go back out to the market sooner or raise larger funds,” he said.

On another positive note, the money raised in 2007 was well-distributed across funds that focus on companies at different stages of growth. Roughly $9.7 billion was raised through 112 early-stage focused funds; 63 balanced-stage focused funds (diversified funds that invest across multiple stages rather than just one) took in $10.6 billion; 24 later-stage focused funds raised $7.2 billion; and 22 expansion focused funds garnered $4.8 billion.

It all adds up to a strong year, and no bubble—or so the report seemed to indicate without stating the no bubble part directly. Said Heeson in his statement, “we are nowhere near the unsustainable fundraising levels of the 1999 to 2001 period when the industry raised more than $200 billion.” Alex Tan, global manager for Private Equity Content Operations at Thomson Financial, added: “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.”

The three largest funds raised last year were:

Technology Crossover Ventures VII (Palo Alto, CA) — later stage, $3 billion
Bessemer Venture Partners VII (seven worldwide offices, no headquarters) — balanced stage, $1.3 billion
Vector Capital IV (San Francisco, CA) — expansion stage, $1.2 billion

Here are screen grabs of the rest of the data, including a table on new vs. follow-on funds, which were both up in 2007 as well.

NVCA 2007 data table VC data 2007

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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