The plummeting economy put a hold on venture activity in the first quarter, a pair of studies show.
U.S. venture capitalists invested only $3.9 billion during the period, down 50 percent from a year ago, according to one of the studies from Dow Jones VentureSource. It was the lowest quarterly total in a decade – from before the burst of the dot-com bubble.
Decline in venture activity accelerates. Source: Dow Jones VentureSource
A similar study from the National Venture Capital Association, PricewaterhouseCoopers and Thomson Reuters found that only 549 deals were signed, a plunge of 37 percent. Every major industry sector saw double-digit declines in activity, the firms said.
The surveys confirm what venture capitalists have been saying for months, that they industry has essentially ground to halt.
“Venture capitalists have slowed their investment pace in order to work with existing companies that are not able to exit the venture portfolio due to the shuttered IPO window and the weakening acquisitions market,” said Mark Heesen, president of the NVCA. “While this drop in investment is significant, we are not forecasting levels to continue to fall further. We would expect a mild and steady increase in investment throughout the rest of the year.”
No industry was immune to the fall off. Investments were down 42 percent software startups, 46 percent, in biotechnology companies and 31 percent in Internet businesses.
Even trendy clean-tech saw a plunge. Investments of $154 million put into 33 deals fell 84 percent.
A large share of the money spent during the quarter went to established portfolio companies. Late-stage deals accounted for 55 percent of the total, compared with 47 percent a year ago, said VentureSource.
Seed and first-round companies received just 18 percent compared with a quarter of all funding last year.
California dominated the spending, with 47 percent of the nation’s total.
