Rare Bright Spot: Venture Capital Growth

Investors continue to sit on the sidelines of the stock market, but when it comes to venture capital they're jumping back in. Venture Capital spending is returning to pre-recession levels, and this is shaping up to be a bull market for VC funding.


Just last week Institutional Venture Partners, an early investor in Twitter, Zynga, and Homeaway, announced it raised a $750 million fund. The new fund, which is now closed to investors, will focus on later-stage companies. Stephen Harrick, a partner at IVP, says the end of recession is historically a wise time to invest: valuations are more reasonable, entrepreneurs have their pick of the litter when hiring, and technology infrastructure is more affordable than ever.

Marc Andreessen's Andreessen Horowitz fund has just started reaching out to investors to raise a new $650 million fund. The firm can't comment on its plans or its time-frame for securing the funds, due to SEC regulations. But it's safe to guess that they're having no problem finding eager investors: Just last year the firm raised a $300 million fund which it invested in the likes of Foursquare, Boku, and Zynga.

In the second quarter VC funding rebounded to its highest total since Q3 of 2008. According to Dow Jones VentureSource, VC investors put $7.7 billion to work in 744 deals for US companies last year — that's a 13 percent increase in deals and a 26 percent increase in capital raised from the year-ago quarter.

Dow Jones VentureWire editor Scott Austin attributes the rebound to a recovery of the IPO market and some major M&A deals — which offer exit opportunities to investors. But Austin warns that we're not out of the woods just yet. He says we'll need to see even more significant growth in M&A activity and IPOs to sustain this kind of VC momentum.

Questions? Comments? MediaMoney@cnbc.com