Venture capital fundraising is back in a big way, driven largely by brand name funds with marquee investments in digital technology and media. In 2011’s first quarter, capital commitments to venture funds almost doubled over the same period last year, according to data released today by Dow Jones LP Source.
US venture funds collected a total of $7.7 billion in Q1; they raised a mere $3.9 billion a year prior. It’s the largest Q1 fundraise since 2001, the news service reported.
If there’s anything to learn here, it’s that brand names matter, as institutional investors grow increasingly wary of large alternatives portfolios. The blockbuster quarter was driven largely by big closes from Palo Alto stalwarts like Sequoia Capital, Bessemer Venture Partners, and Kleiner Perkins Caufield & Byers. In fact, only 23 funds contributed to the big quarter; it’s the lowest number since 2003.
The concentration conjures up classic investment clichés about the rich getting richer and rising tides carrying all ships, but it also reflects a creeping shift in focus away from life sciences investing and toward buzzed-about digital media players. While venture fundraising in recent years has declined, the firms that succeeded with bets on the biggest web hits—including sites like Facebook, Pandora, Groupon, LinkedIn, and Zynga—were the most successful at scooping up new money.
Kleiner Perkins raised $932.33 million for its KPCB Digital Growth Fund, a late stage-focused vehicle which has already invested in Groupon, Twitter and Facebook. Sequoia Capital, which in the past has backed LinkedIn, YouTube and Tumblr, raised $1.3 billion. Bessemer Venture Partners, whose previous investments include Yelp, LinkedIn, and Skype, secured $1.6 billion. Greylock Partners, which invested in Groupon and Pandora, raised $425 million for a strategy that will focus on late stage financings of “breakout” Internet companies.
J.P. Morgan’s Digital Growth Fund, less of a Silicon Valley heavy hitter, gathered $1.2 billion. Its success was due in part to the fund’s well-publicized minority stake investment in Twitter.
Investors’ obsession with digital media is clear elsewhere. Last week Forbes revived its Midas List, a meticulous ranking of the top 100 venture capital professionals based largely on exit profitability. The list features just 13 life sciences investors; the remaining 87 invest in technology companies, with many of those focused on media.