Late-stage funds so far raised $2.9 billion in 2011

Early-stage funds, raising $1.1 billion, not doing as well this year

Could this be a sign that the bubble is deflating naturally, slowly, instead of bursting as it did in the last bubble over a decade ago?

Early-stage venture fundraising is slowly decreasing, while later-stage funds performed stronger than ever in the first half of 2011, according to Dow Jones LP Source.

In total, 28 early-stage funds raised $1.1 billion, a 48 percent drop in closings and committed capital. Compare that to late-stage funds, which raised $2.9 billion. While Dow Jones says early-stage funds are on track to see less than half of the $5.2 billion raised in 2010, late-stage funds are already a world beyond the $150 million raised in the first half of last year.

With $4.1 billion raised for 15 funds, multi-stage funds upheld tradition by collecting the most capital in the first half of 2011. That said, the amount of capital raised dropped eight percent and number of fund closings fell 40 percent.

Because investors right now seem to be more and more favoring late-stage companies, which generally need to prove their revenue intake to raise more capital, our little bubble situation might not be as precarious as some think. The alternative, and a sure sign of an unhealthy bubble, would be if investors were flooding the space with copycats and derivative startups unable to sustain the capital they’ve received.

Dow Jones has yet to respond to my request for comment on this perspective, but we’ll update as soon as we receive word.

Looking at all private equity in the U.S., Dow Jones LP Source found the market gradually growing stronger. In the first half of 2011, 201 funds raised $64.7 billion, a 35 increase in capital committed versus the $47.8 billion raised by 225 funds in the same period last year.

“After three consecutive years of declining fund-raising, the industry has finally begun to dig its way out of the crater created by the U.S. financial crisis in late 2008,” said Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst. “There’s an abundance of fund managers with strong track records that are back in marketing mode and investors appear to have regained some level of confidence in the asset class.”

European private equity raised $24 billion for 62 funds last quarter, an increase of 48 percent from the $16.2 billion raised for 76 funds last year.

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