VC Market Is on Pace for Strongest Year Since Dot-Com Era

(Bloomberg) -- Venture capitalists are spending cash at levels not seen since the dot-com era, and they’re raising money at a pace to match.

Last quarter, VCs spent $27.3 billion in the U.S., according to a report set for publication Tuesday by research firm PitchBook and the National Venture Capital Association, a trade group. That’s the most in any second quarter since the group began tracking quarterly data more than a decade ago. Combined with a record-setting first quarter, the VC market had its strongest first-half-year performance since 2000.

The $57.5 billion invested in startups so far this year has already surpassed the full-year total for six of the past 10 years. This year is on track to exceed the $81.9 billion invested last year, which was itself a record since the dot-com boom.

VCs have no shortage of cash to invest. Venture funds raised $10.8 billion last quarter. That doesn’t include a stockpile raised by SoftBank Group Corp. The Japanese conglomerate, which is looking to spend $100 billion in the technology business, is a driving force behind the VC fundraising frenzy.

Competition from SoftBank’s Vision Fund is helping inspire long-established venture firms to raise larger funds. Last quarter, those included Foresite Capital’s $668 million health-care fund and Meritech Capital’s $630 million fund—both were much larger than the firms’ previous funds. And there are more in the offing. Sequoia Capital is raising $8 billion across several vehicles, but its efforts aren’t reflected in last quarter’s data because it hasn’t completed the fundraising. On Tuesday, Lightspeed said it raised $1.8 billion.

“Many of these funds are taking an approach similar to SoftBank’s Vision Fund, adopting a meta view and attempting to capitalize on mega-trends affecting entire industries,” the VC trade association wrote it its report.

Another encouraging sign for startups: 28 went public last quarter, the most in three years. Venture funds generated $4.12 billion as a result, more than any quarter since Facebook Inc. held its initial public offering in May 2012.

But acquisitions are the biggest driver of VC returns, and there were plenty of those last quarter, too: Companies spent $8.8 billion to buy 134 venture-backed startups.

To contact the editor responsible for this story: Mark Milian at mmilian@bloomberg.net, Anne Vandermey

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