The money raised by venture-capital firms hit $32.97 billion in 2014, a 62% increase over 2013 and the highest total since 2007, as investors seek to take advantage of a hot market for startup funding and initial public offerings.

Investment returns from venture capital funds are on the upswing, as 105 venture-backed companies went public in 2014, the highest number since 2000, according to Dow Jones VentureSource.

Venture-capital funds are made up of institutional investors such as pension funds, endowments and funds of funds, which commit money to venture-capital firms that manage investments and share the profits with the institutional limited partners, or LPs.

Scott Voss, a managing director at investment manager HarbourVest Partners, said venture industry returns in the past 12 to 24 months “have been some of the best venture-backed deals ever done.”

The heavy investor interest has sent private valuations soaring, with a record number of portfolio companies posting valuations in the billions of dollars, including Uber Technologies Inc. and Airbnb Inc.

The upbeat atmosphere, however, is tempered by fears that some parts of the venture capital industry are overheated. There is plenty of talk of a bubble in Silicon Valley and some leading venture capitalists have urged portfolio companies to be careful about spending.

Limited partners, still mindful of the lessons they learned in the dot-com bubble, don’t seem to be rushing blindly back into the asset class.

“We have not seen a big institutional rotation into venture, which is what you saw in 2000,” said Peter Denious, a partner at fund-of-funds manager Flag Capital Management. Venture funds raised a record $85.07 billion that year.

Eight venture capital funds of $1 billion or more accounted for $11.84 billion of the 2014 total, with the largest being Tiger Global Private Investment Partners IX LP at $2.5 billion. Growth investor Technology Crossover Ventures VIII LP closed at $2.23 billion.

Fundraising was up across the board, with venture firms focused on early-stage investing showing an increase of 33.1%, late-stage up 41.1% and multistage up 157.2%, according to Dow Jones LP Source. Multistage VC raised the most, with $13.52 billion, followed closely by early stage fundraising, with $13.04 billion.

Author: RUSS GARLAND Publisher: URL: