Q4 VC Fund Raising Lowest in 3 Years; Buyouts Fund Raising at All Time High $102.9B in 2006

Private equity fundraising activity slowed considerably in the fourth quarter of 2006 but still broke records for the full year according to Thomson Financial and the National Venture Capital Association (NVCA). The largest buyout fund closing for 2006 was $14 billion TPG Partners V, LP followed by Bain Capital Fund IX at $8.0 billion. 

During the 4th quarter of 2006:

  • 37 venture capital funds raised a total of $2.83 billion,  the lowest amount raised by the fewest number of funds for the past three years. 

  • 39 Buyout and Mezzanine funds raised $17.83 billion

  • Venture capital funds raising the most money in 4Q2006 were Benchmark Europe III, L.P. with $550 million, Granite Global Ventures III with $400 million and Sofinnova Venture Partners with $375 million. 

  • The largest buyout fund raised for the quarter was GTCR Fund IX, LP which closed $2.75 billion. Some notable buyout funds closings were Hellman & Friedman Capital Partners VI with $2.70 billion and Green Equity Investors V closing with $1.997 billion. 

For the full year 2006:

  • Venture capital funds saw the highest fundraising year since 2001 with 200 funds raising $28.5 billion.  163 follow-on funds raised $27.0 billion with 37 first-time funds raising $1.5 billion.

  • Buyout and Mezzanine funds recorded the highest year ever with 138 funds raising $102.9 billion, an all time high.

  • For the full year 2006, the largest funds raised were Oak Investment Partners XII, LP at $2.56 billion, followed by New Enterprise Associates 12, LP at $2.50 billion and VantagePoint Venture Partners 2006, LP and Polaris Venture Partners V, LP both at $1.0 billion. 

Fundraising by U.S. Venture Capital and LBO/Mezzanine Funds (2002-2006)

 

Venture Capital

Buyout & Mezzanine**

Year/Quarter

Number of Funds

Venture Capital ($M)

Number of Funds

Buyout & Mezzanine
($M)

2002

172

3,820.4

86

24,831.4

2003

146

10,707.8

91

28,952.8

2004

203

18,557.1

139

51,236.4

2005

214

28,001.8

178

96,087.4

2006

200

28,596.5

138

102,940.7

4Q'05

76

9,248.1

52

32,902.0

1Q'06

68

6,516.3

49

25,939.1

2Q'06

66

13,817.3

44

35,999.8

3Q'06

66

5,432.7

35

23,172.1

4Q'06

37

2,830.2

39

17,829.7

Source: Thomson Venture Economics & National Venture Capital Association

“The deceleration of fundraising in private equity this quarter was expected and welcomed for a number of reasons,” said Mark Heesen, president of the National Venture Capital Association. “On the venture side, we are coming to the end of the current fundraising cycle as most firms are now turning their attention to investing the funds raised in the last three years. Additionally, the venture industry is extremely wary of bringing too much liquidity into the asset class. We want to keep fund sizes reasonable so dollars can be deployed smartly. The discipline exercised this year by the venture firms has been commendable. We hope the same holds true on the buyout side.”

“Despite the decrease in private equity fundraising for the quarter, it was a banner year for private equity fundraising as a whole,” said Alex Tan, Global Private Equity Research Manger of Thomson Financial. “This sets the stage for an intriguing and exciting private equity environment for 2007.”

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