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Venture Capital Fundraising Accelerates

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From Bloomberg News

U.S. venture capital firms’ fundraising almost tripled in the third quarter from a year earlier, raising concern that too much money chasing deals could hamper industry returns, according to a survey released Monday.

Venture capital firms raised $5.54 billion for 46 new funds, up from $1.99 billion for 31 funds last year, according to a survey by New York-based Thomson Venture Economics and the National Venture Capital Assn. of Arlington, Va.

Pension funds are plowing money into venture capital and other so-called alternative assets in search of higher returns than those offered by stocks and bonds.

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The third-quarter fundraising total was 78% higher than the second quarter’s $3.1 billion, the survey said.

“We are now seeing an extremely strong level of interest in the venture capital asset class,” said Mark Heesen, president of the venture capital association.

Heesen cautioned venture firms against raising more money than they can invest profitably. “If the industry begins to take more money than can be invested successfully, performance will suffer,” he said.

The largest funds raised last quarter included the $1.5-billion Oak Investment Partners XI fund; the $600-million InterWest Partners’ IX fund; and Benchmark Capital’s Europe II fund at $375 million. Battery Ventures raised $450 million for its seventh fund. The funds from Oak and Battery invest in companies beyond the early stages of development.

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