Private Equity Markets Hear Sonic Boom in Q205

A news release from the National Venture Capital Association (NVCA) said that its research, co-sponsored with Thomson Venture Economics, found that 43 venture funds raised $6.1 billion and 38 buyout and mezzanine-focused funds pulled in $22.1 billion in commitments during the second quarter of 2005. That marked the highest average commitment size since the year 2000, according to the announcement.

On the venture capital side, the second quarter saw a 6.5% advance over the previous quarter’s $5.7 billion raised by 61 funds. However, when compared to the same period a year earlier, venture funds posted an 87.7% increase. Buyout funds experienced a 63.7% increase over last quarter and a 32.5% gain over the second quarter of 2004.

At the mid-point of the year, the state of private equity fundraising is stronger than it has been since the high water mark of 2000-2001. Year to date in 2005, 96 venture funds have raised $11.8 billion in commitments and 76 buyout/mezzanine funds have attracted $35.6 billion.

Early Stage vehicles continued to dominate the venture space, with 25 funds receiving $2.3 billion in commitments.   Follow-on venture funds continued to be predominant, with 34 of the quarter’s 43, and 78 of 95 for the first half of the year. While the established teams are raising larger amounts, the newer funds are fewer and smaller than at any point in recent history. On the buyout side, mega funds played a large role in the quarter’s growth, with five of the top funds raising just over $14 billion. Venture capitalists drew a robust infusion of new money in the second quarter, with 43 funds raising $6.1 billion to use for future investments.

Mark Heesen, NVCA president, predicted that more money will go into such energy sectors as clean technologies, efficient energy and fuel cells, as well as into consumer technology products in the wake of wildly popular devices like Apple’s iPod.