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Over half of venture firms plan to raise new funds in 2004

Slightly over half of venture capital firms are planning to raise another fund before the end of 2004, according to the latest VentureOne / Ernst & Young Outlook Study. The distribution of fundraising was evenly matched between the US and Europe, with 53 per cent and 48 per cent, respectively, indicating they were ready to launch new funds.

Along with the predicted upturn in fundraising activity, the majority of venture capital firms also plan to increase their rate of investment, with 73 per cent intending to invest in up to five first round deals over the next year. An additional 21 per cent are planning to invest in five to seven early stage deals.

‘VC activity in the most recent two quarters is showing signs of optimism after the downturn of the last three years,’ said Gil Forer, global venture capital advisory group leader at Ernst & Young. ‘The entrepreneurs we’re seeing today are leading higher quality companies that are more capital efficient, with technologies that are meeting market needs, making it reasonable to expect increased early stage investing globally.’

But Forer went on to warn that the coming year would also bring challenges. The emergence of new global innovation centres such as China and India, the need for funds to efficiently prepare companies for an exit in the new regulatory environment, and the continuing consolidation of the VC industry were all cited as potential obstacles for the US and European venture industries.

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