04/11/2011 03:35 pm ET Updated Jun 11, 2011

U.S. Venture Firms Have Best Fundraising Start Since 2001

Venture capital firms raised over $7 billion during the first quarter of 2011, their best annual start since 2001, but over half of the sum came from only three big firms, which together brought in over $4.1 billion during the quarter.

The $7.1 billion total for the industry, a 76 percent increase from the same period last year, also makes for their best quarter since the third quarter of 2008, according to Thomson Reuters and the National Venture Capital Association.

Venture capital is a major source of funding for new companies, which research has shown are a big source of new jobs. Companies that are three to five years old account for less than 1 percent percent of all companies, but generate 10 percent of new jobs per year, according to the Kauffman Foundation.

"It's certainly good news. We're seeing limited partners coming back to the asset class after a difficult two years," said Mark Heesen, president of the NVCA. "But I think you also have to put it in perspective. We did not see a lot of smaller funds being able to raise funds. There were three very large funds that made up a good chunk of the amount that was raised in the first quarter."

Those three funds finished the quarter with billion dollar rounds. Bessemer Venture Partners VIII raised $1.6 billion, Sequoia Capital raised $1.3 billion and J.P. Morgan Digital Growth Fund raised $1.2 billion, together making up over half of all fundraising in the quarter.

The three funds are all focused on tech, the one field of venture capital that has continued to see gains even as the rest of the market has slowed. Sequoia Capital has helped fund web giants like Yahoo and YouTube, as well as younger strongholds like blog service Tumblr, while Bessemer counts Skype, LinkedIn, and Yelp among its portfolio. And J.P. Morgan Digital Growth, created this year, has been said to have an eye on investments into hot social media startups like Twitter and Zynga. The increasing number of big investments into such tech companies has led some to speculate that the tech industry is headed for another bubble.

But smaller, less established funds had trouble raising money, an indication that the industry is still struggling to deal with a floundering market. The first quarter of 2011 saw only 25 fund closings, the lowest total for a first quarter since 2003.

Some venture capitalists believe that the distribution of fundraising reflects a larger trend in the industry that will leave a smaller number of higher quality firms remaining as the market shrinks.

"It underscores the haves and have-nots notion in the venture industry--where a select group of firms who have good numbers and good teams raise money, there will be a large amount of money raised," said Bryan Roberts, partner at venture firm Venrock. "Other than that it continues to be a difficult and protracted fundraising period for many people."