New data out from Dow Jones shows that Limited Partners pumped more money into US venture funds last quarter than at any time since 2001. Interestingly the money is going into fewer funds though. A few very large funds have done well (Sequoia closed a $1.3bn fund, Bessemer a $1.6bn fund and Greylock a $1bn fund), and according to Techcrunch, early stage funds also did well. Mid sized funds were the losers.
Perhaps it isn’t surprising that mid-tier funds are struggling given that the all the action seems to be at the small and large ends of the spectrum, not in the middle. Just look at how much value can be created with little money by software and web startups these days and the way that internet leaders like Facebook, Twitter, Groupon, Zynga etc are providing attractive opportunities for larger funds to make investments.
For students of the ‘bubble’ the obvious implication of a large influx of capital like this is that valuations will continue to rise.
The bad news in the data is that European VCs didn’t do so well. $653m was raised by just 5 funds last quarter, down from $1.3bn in 13 funds in the same period last year. The five successful funds were all early stage. I’m sure that some funds slipped under Dow Jones’ radar and that more than five were successful last quarter, however, I expect that their sample is representative and the trend is correct.
UPDATE: as Marc Brandsma pointed out in the comments the European data looks like it might pertain only to US funds raising in Europe, in which case the picture here could well be much healthier.
Note that this is only one data point. We won’t know for a couple of quarters if LP commitments to venture are really on the rise, or if the reverse is true in Europe.