Private Equity Fundraising Dipped in Year’s First Half, But Still Strong: Venture and Mezzanine Segments Rise

Despite a near complete shutdown of the IPO market, U.S. private equity fundraising remained reasonably strong throughout the first half of this year—185 funds brought in $133 billion, coming in just under last year’s record pace, according to a new report from Dow Jones Private Equity Analyst. The venture capital segment performed particularly well, with 72 funds taking in $11.5 billion, up 15 percent from the $10 billion raised by 62 funds in last year’s first half.

In Washington, four private equity funds raised $532 million, representing less than half of one percent of the total. But that was up sharply from the $66 million raised by two funds a year earlier.

It’s possible to take a glass-half-full or glass-half-empty view on the overall private equity figures. The total of $132.7 billion was just 3 percent off the record $137.2 billion raised by U.S. private equity firms in the first half of 2007. Pretty good for a down economy. At the same time, Dow Jones reports, it was the first year-over-year falloff in fundraising since 2003. So the party could be breaking up.

The biggest downturn in dollar terms came in the buyout/corporate finance category, which fell from $107.5 billion in the first half of 2007 to $85.5 billion in 2008. The Funds of Funds and Secondary categories also saw significant declines.

Still, the drops were almost offset by the venture capital and mezzanine funding categories. The venture segment showed gains in both the numbers of funds and dollars raised. And mezzanine fundraising set a new first-half record with $24 billion raised by seven firms—compared to just $2.3 billion last year. Almost all of it came from the $20 billion GS Mezzanine Partners V LP fund, but even without including that deal the category saw a large percentage gain.

Washington fared best in the venture capital category, where three funds—the $250 million Madrona Venture Fund IV, the $240 million Maveron Equity Partners IV, and the $2 million Founder’s Co-op fund—raised $492 million, about 4 percent of the total. That was up more than seven-fold from the $66 million raised by two funds a year earlier. The state’s only other contribution to overall fundraising this year was $40 million garnered by Unitus Equity Fund II in the buyout/corporate finance category.

European private equity firms, meanwhile, saw strong gains in the year’s first half, with $61 billion invested in 80 funds, compared to $52.5 billion last year. “The differing fortunes of European private equity funds are an indication that limited partners are shifting some attention away from the U.S., where the economy is seen as particularly weak and where many of LPs are over-concentrated,” Jennifer Rossa, managing director of Dow Jones Private Equity Analyst, said in a statement.

Private Equity Fundraising

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