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Venture Funds in U.S., Europe Raise More Cash in Q1

Calculator keys (Investor.gov)

(Investor.gov)

More venture capital (VC) funds in the U.S. successfully hit their fund-raising targets in the first quarter of 2012, and like their counterparts in Europe, raised more cash in the process, according to Dow Jones LP Source, a financial industry research service. Tracking VC fund-raising offers an early indicator of investment money for start-up companies like those begun by science entrepreneurs.

LP Source calculates that U.S.-based VCs raised $7 billion in 47 funds during the first quarter, a 5 percent increase in capital raised and a 34 percent increase in fund closings after reaching their targets compared to the same period last year. European venture funds, says LP Source, raised $954 million in 11 funds, an 8 percent increase in capital raised for the same number of fund closings compared to the first quarter of last year.

Both early-stage and multi-stage funds in the U.S. registered gains in raising capital. Some 23 early-stage funds raised $1.6 billion, a 35 percent jump in fund closings and nearly triple the amount of capital raised, compared to the first quarter of last year. However, just 3 early-stage funds accounted for 79 percent of the capital raised by these companies. LP Source notes that there still appeared to be funds left over for smaller VCs; 12 other U.S. funds with targets of $50 million or less held closing in the first quarter.

Among multi-stage funds in the U.S., 17 funds raised $5 billion, a 13 percent rise in fund closings and 19 percent jump in capital raised. Similar to early-stage funds, two companies accounted for more than half of the capital raised in this group. Late-stage funds attracted $449 million in the first quarter, a 77 percent decline compared to the same period last year, although the number of funds in this group rose from 3 last year to 7 this year.

In Europe, multi-stage funds reported raising $105 million in the first quarter, more than double the amount raised in 2011, but all capital raised was concentrated in only two funds. Early-stage funds in Europe attracted $769 million across eight funds, an 8 percent decline in capital committed from the same period last year. Late-stage funds did not report any closings in the first quarter, although LP Source this is not uncommon.

The pattern reported for VC funds in the first quarter — increases in funds raised, dominated by a few large players — was reflected in transactions for private equity companies overall. The 11 largest U.S. private equity fund closings and the three largest European closings, says LP Source, accounted for more than half of the total capital raised in each region. VCs are a type of private equity investors that focus on start-up companies.

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