Private equity fundraising hits six-year low

SAN JOSE, Calif. — Private equity fundraising in the U.S. hit a six-year low in 2009, according to a report issued Tuesday (Jan. 12). The news comes as one veteran investor is calling for greater transparency in venture capital investing.

In 2009, 331 private-equity funds raised $95.8 billion, down 68 percent from $299.9 billion raised by 508 funds in 2008, according to Dow Jones LP Source. The market should rebound this year, "but 2010 will not see a return to levels seen before the economic downturn," said Jennifer Rossa, managing editor of Dow Jones Private Equity Analyst.

Leveraged buyout and corporate funds, the biggest part of the private-equity pie, fell 73 percent to $53.7 billion last year. Venture capital fund raising fell 55 percent to $13 billion across 120 funds. Venture firms New Enterprise Associates and Norwest Venture Partners bucked the trend, each raising $1.2 billion.

The venture capital sector needs more transparency in its transactions to rejuvenate the sector, said Georges Van Hoegaerden, managing director of the Venture Company. Limited partners should disclose how much they commit to VC funds and when, general partners should disclose when and how much of those funds they pump into startups and entrepreneurs should release details of how much they raise when their companies are acquired, he said.

Such transparency will let entrepreneurs know where they can find investors. It will also help investors see who is using the money most wisely, he said in a Web posting.

Despite the issues raising funds, many VCs are expressing optimism about the field. That's due to a widespread belief that after a long dry spell, there are now opportunities to take tech companies public again.