Private equity raises record funds in 2000

The latest Initiative Europe focus report says that private capital is increasingly being raised for investment in European technology companies despite turbulence in the world’s public markets.

Record amounts of capital have been raised in 2000 by private equity and venture capital houses, driving up the average size of funds targeting the European market, according to analysis published in the latest Initiative Europe focus report.

Figures published in the report reveal that: E27bn of new capital was raised by private equity and venture capital houses in the first ten months of 2000, compared with the E20.4bn raised in the whole of 1999. The average size of funds also rose by 37 per cent in the year 2000 and stands at nearly E450m.

The first half of 2000 saw almost twice as much capital raised for investment in European technology companies compared with the non-technology sector. Funds targeted at early stage investment have accounted for almost 45 per cent of all stage specific funds announced and 42 per cent of those closed between 1997 and 2000.

Funds are increasingly being raised for investment on a pan-European basis and are focused on one or two investment stages, rather than pursuing a generalist investment strategy – 17 per cent of funds in 2000 closed following a generalist investment strategy compared to a figure of 47 per cent in 1997.

Nicholas Gordon of Initiative Europe's Private Equity Research Unit said: ” This year has already reached a record level in terms of new capital raised, suggesting that the boom in the amount of capital invested is set to continue into 2001 and beyond. In general, there is evidence of a growing acceptance amongst European institutional investors towards the private equity asset class, leading to an increased willingness to commit capital to the industry.”

The report also notes though that the second half of 2000 saw a significant slowdown in fundraising activity in terms of both new funds announced and amounts of capital raised by funds closing.