US venture fundraising rallies as top firms dominate

The 28% increase in fundraising by venture firms in the second quarter relative to Q2 last year, driven largely by two successful efforts by Accel Partners, shows LPs are still willing to back top tier VCs.

Thirty-seven US venture capital funds raised a total of $2.7 billion during the second quarter of 2011, according to data from Thomson Reuters and trade body the National Venture Capital Association.

The figure represents a 28 percent increase in dollar commitments compared to same period last year but a 23 percent drop in the number of venture funds garnering commitments. During the first half of 2011, 76 venture funds raised $10.2 billion, a 67 percent increase in value compared to the first two quarters of 2010, but a 15 percent decrease in volume.

The 76 funds that received commitments in the first half of the year marks the lowest number of funds to raise capital for venture since 1995.

“The fact that the number of firms raising money successfully remains at such low levels confirms an ongoing contraction of the venture capital industry, which will serve well those funds that can obtain commitments – but that group is becoming more and more narrow,” said Mark Heesen, president of the NVCA ,in a statement. “
Roughly 50 percent of the $2.7 billion raised for venture in the second quarter of 2011 came from Palo Alto-based Accel Partners, whose second growth fund raised $875 million and eleventh fund raised $475 million.

Similarly, in the first quarter of 2010, nearly half of the more than $7 billion raised for US venture funds went to two of the industry’s most dominant players: Bessemer Venture Partners, which raised $1.6 billion for its eighth fund, and Sequoia Capital, which according to a regulatory filing had raised $1.36 billion for its “Sequoia Capital 2010” fund.

Fundraising for all of 2010, meanwhile, reached just $12.5 billion, compared to $16.3 billion in 2009, according to Reuters and the NVCA.