Investing February 1, 2005

VC Inflows Up Significantly in 2004

February 1, 2005 (PLANSPONSOR.com) - Inflows into venture capital firms - pooled investments usually put into start-ups - rose significantly in 2004, posting a capital infusion that is more than the last two years combined.
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According to Thomson Venture Economics and the National Venture Capital Association, $17.6 billion came into 170 venture capital funds last year, up 67% from the 2003 total of $10.6 billion flowing into 135 funds. This is still far below the 2000 figure of $106.1 billion into 635 funds seen at the height of the tech boom, however.

The fourth quarter was the kindest to venture capital funds, with 50 firms puling in $6 billion in these three months. Third quarter gains were $5.8 billion, second quarter gains were $3.1 billion, and first quarter gains were a slim $2.6 billion.

Industry experts think that the trend of large inflows will continue in the first two quarters of 2005, according to the Wall Street Journal. However, some were cautioning that the industry should not grow too fast, or risk choosing poor investments, as was seen at the end of the tech boom.

According to the trade groups, only three funds raised more that $500 million n the year with most funds raising much less than this. Oak Investment Partners, Interwest Partners and US Venture Partners were the three firms at the top of the list.

Most money (52.4%) will go towards early and seed stage funds, which invest the youngest start-up companies, according to the Journal.

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