New England Private Equity Fundraising Way Up—but Venture Capital Segment Down

4/8/08

New England’s private equity firms raised nearly $7 billion during the first quarter of 2008, more than twice the amount raised in the same period of 2007. That’s far stronger growth than in the nation as a whole. The bad news for entrepreneurs trying to get startups off the ground is that the trend is just the opposite when it comes to the venture capital segment.

During the first three months the region’s venture capital firms raised less than half of what they did a year ago, according to statistics released yesterday by Dow Jones Private Equity Analyst. At the same time, venture capital fundraising in the whole U.S. grew by more than thirty percent.

The New England downturn surprises Michael Greeley, general partner at Flybridge Capital Partners and president of the New England Venture Capital Association. “I expected that we would see the same expansion in the region as on the national level,” says Greeley, who’s also an Xconomist. “My firm just closed a fund of 280 million—and that was well over-subscribed. In general, venture capital returns are looking more attractive.”

Cambridge, MA-based Clarus Ventures raised the biggest amount of money in the quarter among the New England venture capital firms, $660 million, for its Clarus Lifesciences II fund. The fund will invest both in early and later stages in biotechnology, specialty pharmaceutical, and medical technology companies.

The statistics for New England are part of a larger study, covering the whole U.S. private equity market. Normally, most of the private equity money goes into funds financing buyouts or other investments in mature corporation. Only a small percentage is put into venture capital funds, which invest in startups and other early stage companies. When looking at the nation as a whole, this holds true this year, though the total raised for buyouts was far less during the first three months of 2008 compared to a year ago. “The shakeup in the credit market has slowed the pace of buyout deals. That’s making it harder for large firms like Blackstone Group to justify raising new funds,” said Jennifer Rossa, managing editor of Dow Jones Equity Analyst newsletter, in a press release about the study.

Once again, the trend went the other way for New England, with nine times as much money—roughly $5 billion total—put into buyout funds during this years first quarter compared to Q1 2007.

Fundraising First Quarter

  Number
of Funds
$ (milions)
  2007 2008 2007 2008
Venture
Capital
       
United States 22 32 3842 4972
New England 7 5 2407 1020
Total
Private Equity
       
Unitd States 68 81 44324 58452
New England 14 15 3009 6917

Source: Dow Jones Private Equity Analyst

Erik Mellgren is a Swedish journalist who worked for Xconomy Boston in 2008 as part of the Stanford Innovation Journalism Fellowship program. His real job is with Ny Teknik, a leading technology and innovation magazine in Sweden, but he loved seeing the Red Sox at Fenway. Follow @

By posting a comment, you agree to our terms and conditions.