Venture capital activity remains strong in the United States and abroad, thanks in part to fear of an equity market correction and a strong supply of deals, said Alan J. Patricof, chairman of Patricof & Co. Ventures Inc., New York.
"I've never seen the opportunities as strong as I've seen (recently)," said Mr. Patricof. The volume and quality of deals is such that it may shorten the time between funds, he said.
After closing its fourth U.S. fund in March, Mr. Patricof said, he thought it would be four to five years before the firm would begin raising another fund. But given the pace and volume of deals, it may be three to four years at the most. The fund, APA Excelsior IV, is a $265 million limited partnership that includes the state pension funds of New York, California, Michigan and New Hampshire among its investors.
On the other hand, sponsors are increasing investments in venture capital as they become more comfortable with it, said Mr. Patricof. He also noted wealthy individuals are starting to invest more.
Venture capital is experiencing a trend of parallel investment, where sponsors invest additional amounts directly into the same companies in which they invest through funds as a way to save on management fees while piggybacking on the research and due diligence of the fund manager, said Mr. Patricof.
In the past few years, more sponsors have insisted on writing that flexibility into their contracts, a sign they are becoming more comfortable with direct investment, he said.
The ferment is not exclusive to the United States, he said. The firm has raised funds in Europe since 1981 and sees continued interest among both U.S. sponsors investing overseas and European sponsors investing at home and with neighbors.
Patricof & Co. is currently investing funds in England, France and Germany. It recently closed a $260 million fund in England that had GE Capital Corp. as one of its investors; it is raising a new fund in France targeted for $150 million; and it plans to raise a German fund next year with a target of $100 million.