NEW YORK – Sounding the alarm for private equity firms in search of fresh funding, industry veteran Whitney & Co. recently closed its fifth investment vehicle a full $900 million shy of its initial $2 billion target capitalization.
“We launched our fund-raising process against a backdrop of the most challenging market conditions in over a decade,” said Peter Castleman, chairman and chief executive of Whitney, in a prepared statement.
Indeed, the Whitney experience seems to be more and more the market norm, with numerous firms either failing to raise desired capital, sending letters of apology to limited partners or, in some cases, sending back capital commitments all together.
According to figures released in mid-May by Venture Capital Journal publisher Venture Economics, in association with the National Venture Capital Association, domestic private equity (i.e. VC- and buyout-focused) firms raised just $26.63 billion for 135 funds during the first quarter of this year, down over $18.5 billion from the previous three-month period and the industry’s lowest total since the third quarter of 1999.
The drop for traditional VC fund-raising efforts was similarly bleak, as only 95 firms managed to raise $16.1 billion, down from the $23.8 billion raised by 147 firms the previous quarter. Like with the overall private equity results, the venture capital take was the lowest since Q3 1999, when 103 firms raised $11.4 billion.
While the fund-raising market is no doubt soft, a number of firms were still able to close on billion-dollar-plus mega-funds in the first quarter, led by Summit Ventures’ $2.085 billion behemoth ($234.4 million of which was actually raised in Q1). Other $1 billion-plus VC funds closing in the first three months of 2000 came from Whitney, Austin Ventures, Charles River Ventures, U.S. Venture Partners, Meritech Capital Partners, Spectrum Equity Investors, Walden International and Worldview Technology Partners.
The largest non-venture-specific fund closed in the first quarter of this year was from Madison Dearborn Partners, whose $3.8 billion fourth investment vehicle will be split up approximately 60%/40% between buyout and early-stage transactions.