VCs off to best fund-raising start in decade

Interest in social media start-ups fuel heavy investing during first quarter

U.S. venture capital companies are off to their most successful fund-raising start since 2001, in large part because of intense investor interest in social media companies.

The National Venture Capital Association and Thomson Reuters on Monday reported that 36 U.S. VC funds raised nearly $7.1 billion in the first quarter.

According to both organizations, the Q1 numbers mark "the strongest quarter for U.S. venture capital fundraising since the third quarter of 2008 and the best annual start for fundraising in the U.S. since 2001."

The first-quarter numbers also are 76 percent higher than last year's Q1 total of $4 billion raised by 44 funds.

A year ago, of course, the economy was still struggling to emerge from the worst recession since the 1930s. And while unemployment remains unacceptably high, capital has been increasingly available over the past year as investors look for emerging sectors to bet on.

They found one in social media, as companies such as Facebook, Groupon, Twitter, Zynga, LinkedIn and others have sparked the kind of investor excitement -- and warnings of a second bubble -- not seen since the original Internet gold rush of the late '90s. That bubble began leaking air in March 2000, after which hundreds of presumably promising Internet start-ups withered away, unable to turn investment into sustainable revenue and profit.

“This year will be a defining one as many venture capital firms will be fundraising, some of

whom have been waiting for the investor climate to improve before going out,” NVCA President Mark Heesen said in a statement.

Bessemer Venture Partners raised the most funds ($1.6 billion) in Q1, followed by Sequoia

Capital ($1.3 billion) and J.P. Morgan Digital Growth Fund ($1.2 billion).

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