Venture fundraising hits post-bubble high

With distributions to limited partners up over the past several years and venture-backed IPOs also setting a post bubble record in 2014, LPs are warming again to the asset class.

This was evident in fourth-quarter fundraising. New and follow-on funds raised $7.4 billion through mid-December, according to a VCJ analysis of preliminary data from Thomson Reuters.

This total includes a venture fund that Tiger Global Management closed in November and which some market monitors don’t include in their fundraising reports.

The year-end quarter came in under the first two quarters of the year, which were especially strong, but was up from $6.1 billion raised in the third quarter, according to the Thomson Reuters data.

The Q4 activity lifted the 2014 annual total of U.S.-based venture funds (about $33 billion) past the $31.1 billion raised in 2006, the largest year for venture fundraising since $38.9 billion was raised in 2001. (A few of you may recall that venture funds raised $101.4 billion in 2000, the all-time record.)

This year’s fundraising represents a big increase from the $17.7 billion of 2013 and $19.8 billion of 2012. It shows how much LP perceptions of the industry have changed.

The fourth quarter got a big boost from Tiger Global’s $2.5 billion Tiger Global Private Investment Partners IX, which was announced in a filing with the Securities and Exchange Commission in November. It was the second Tiger Global venture fund this year. The money manager raised its $1.5 billion Tiger Global Private Investment Partners VIII in the second quarter.

The fourth quarter fundraising total included a $675 million 10th fund from Canaan PartnersFormation 8’s $500 million second fund; and Polaris Partners’ $450 million seventh fund. Upfront Ventures announced in mid-December that it raised a fifth fund at $280 million.

Activity earlier this year was fueled not just by Tiger Global, but by billion-dollar-plus funds from Andreessen Horowitz, Lightspeed Venture Partners, JPMorgan Chase, Norwest Venture Partners, Founders Fund, Accel Partners and Technology Crossover Ventures.

The 10 largest funds that closed in 2014—which includes the two raised this by Tiger Global and a $715 million fund by Bain Capital Venture Partners—collectively raised about $12.9 billion, or roughly 40 percent of the total amount raised during the year.

Looking ahead, fundraising in 2015 will certainly get a boost from New Enterprise Associates, which has feelers out for a new multi-billion-dollar fund. Sources say a 2015 closing for the new NEA fund is most likely.

However, most LPs have anticipated a slowdown in venture fundraising next year.

“People are looking for portfolio octane and traditionally the place you get it is venture capital,” Chris Douvos, a managing director at Venture Investment Associates, said in September. But “the increase in fundraising is a result of the supply of funds in the market this year. I think we’ll see a slowdown to more typical levels in 2015.”

In all, preliminary Thomson Reuters data shows that 245 U.S.-based venture funds were raised in 2014, compared to 207 last year.

The table that follows lists the top 50 venture funds raised in 2014, which collectively raised more than $25.5 billion. Subscribers to VCJ can see the full table of U.S.-based venture funds raised during the year online.