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Portfolio > Alternative Investments > Private Equity

Venture Capital Surges in Q3; Private Equity Slumps

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Private equity fundraising slowed in the third quarter to the lowest quarterly amount of capital raised in three years, according to alternatives data provider Preqin.

During the quarter, 185 funds held a final close, securing an aggregate $73 billion. This figure could increase by as much as 20% as more information becomes available, Preqin said.

The lack of mega-buyout fund closes appeared to have contributed to the lower fundraising figure.

Still, fundraising for the year is likely to be strong, as $254 billion was raised by funds that closed in the first half.

No mega-buyout funds closed during the industry’s typically quieter third quarter, according to Preqin. However, seven mega-funds are currently in the market looking to raise an aggregate $56 billion.

Among these are Blackstone Capital Partners VII, TPG Partners VI and Hellman & Friedman VIII, each of which is targeting more than $8 billion.

Other Key Q3 Facts:

  • 158 funds held an interim close, securing an aggregate $30 billion
  • 50% of funds closed exceeded their fundraising target, while a further 25% met their fundraising target
  • First-time funds closed accounted for 9% of total capital secured by funds closed, up from 7% in Q2 and 5% in Q1
  • 91 North America-focused funds held a final close, securing an aggregate $33 billion, down from 137 funds that secured $80 billion in Q2
  • Europe-focused funds secured $25 billion compared with $40 billion in Q2
  • Real estate fund Lone Star Fund IX, which held a final close on $7.2 billion, was the largest fund to close
  • A record 2,205 funds are currently in market seeking an aggregate $774 billion, compared with 2,098 funds that were looking to raise $733 billion in January
  • Dry powder for all private equity funds stood at an all-time high of $1.2 trillion, up from $1.1 trillion in December 2013
  • Dry powder solely for buyout funds was at $464 billion, the highest figure since $481 billion in December 2009.

VC Investment up 60%

In 2014 so far, $59 billion has been invested in 5,272 deals globally compared with $37 billion invested in 5,940 deals over the same period in 2013, according to Preqin’s latest analysis of global venture capital investment activity.

Although third-quarter activity was below that of the second quarter, the amount of capital invested was 45% higher than during third quarter 2013.

 “Entrepreneurial companies worldwide have received a welcoming boost in 2014, with almost $60 billion invested in young companies throughout the first three quarters of the year — 60% up on the amount invested during the same period last year, Preqin’s head of private equity products Christopher Elvin said in a statement.

 “Asia in particular has seen a notable surge in activity, with investment levels across India and Greater China increasing significantly over the course of the year.”

Elvin noted that the two largest venture capital deals of the quarter also took place in India — Flipkart — and China — Beingmate Group.

Other Key Q3 Facts:

  • 1,664 financings took place, down 8% from Q2, valued at an aggregate $19 billion, off 16% from the previous quarter
  • The number of North America deals was 6% lower compared with Q2, with a 26% fall in aggregate value
  • More deals took place in the telecoms sector (266) than the healthcare sector (233), the first time this has happened in any quarter
  • The Alibaba Group’s $25 billion IPO was the largest venture capital exit, followed by the $1.7 billion trade sale of Seragon Pharmaceuticals Inc.


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