Here are some slides from Pricewaterhouse Coopers and the National Venture Capital Association illustrating the trends in venture capital deals last quarter that Duncan mentioned yesterday. (Click on them for a bigger image). The overall amount venture firms invested dropped both year-over-year and quarter-over-quarter to $7.1 billion (less than any quarter in 2007, but still above the level of investment every quarter in 2006 and 2005). The average deal size is still healthy at $7.7 million. So things aren’t so bad. The concern is whether this is the beginning of a steeper decline that we will begin to see over the next few quarters, which it may very well be.
VC money going into the software sector (broadly defined) declined 9 percent quarter-over-quarter (flat year-over-year) to $1.264 billion and was about even with the amount invested in biotech ($1.267 billion). If you cut the numbers a different way and look at Internet-specific deals, those declined 7 percent from the fourth quarter of 2007 to $1.310 billion, but were slightly up year-over-year. Meanwhile, the craze over clean-tech investments looks like it may have peaked in the third quarter of 2007 when $851 million was invested. Or, at least, it is taking a breather. That number has now gone down for two quarters, and was at $625 million during the first quarter of 2008.
Finally, here is a breakdown of the money going into early-stage versus later-stage deals. About 23 percent of the money invested in the past four quarters went into seed or early-stage deals, which seems to actually be a slightly higher percentage than was typical over the previous two years.
Perhaps the reason for the decline in total amount invested could be related to fewer startups needing funding. Getting off the ground is so much cheaper today, so early stage funding demand is probably down along with the supply?
I see the top investment is biotech. Think back 20 years to what a computer could do and apply that concept to biotech, we will see amazing developments.
I don’t think these numbers represent a lot, or give any useful insight. The gains and declines are mild and cyclical.
there are significantly lower costs to start an online business now. who paid for this crummy study?
Can we say this is because of the downtime in the Ameriacn economy and low rates of Dollar? I hope so..
While there is a downtick, I think when viewed in context of the larger economic meltdown this actually reflects the robustness of the VC + startup industry. Bear Sterns $2/share happened in Q1!
Welcome to the slowdown. Come to China…
Hey Erick can you tell Mike that Google stock soared 20 percent friday?
I want to know how he feels about it
20% in one day???
Not even M$ in its best days
Feels sooo good to have the GOOG
Someone just put together a slow in the American economy with a hiccup in funding and then painted a pessimistic future.
Oh btw, Apple was around $10 in 2004, friday closed above $160
What a slowdown huh?
Poor M$ and the forgotten souls that own their stock
Maybe because there is not shit for innovation in “Silly Con Vally”. VCs stopped investing in good ideas and good people.
After the first internet melt down the VC’s abandoned the regular people who had ideas and focused their monies on kids with advanced degrees from certain schools to hedge their bets. You ran through that limited group of people and you got limited response, so now they have no clue what to do.
If you are going to be a VC you have to take risk, so take a risk jerk.
@9 Are you George Bush or John McCain? Since those idiots also think that there is absolutely nothing wrong with the economy. But hey we can all take McCain’s advice: “Economy doing bad? Lost your job? SELL YOUR STUFF ON EBAY!”
not exact quote but he did say something along those lines and specifically mentioned eBay(I guess thats what you get for having Meg Whitman as one of your advisers)
@12 I got 3 job offers this week. Bad economy is the elections, thats all
I think you have perhaps gone too negative and cynical. I tend to avoid your posts, but maybe try to write something nice about a company without your petty often negative 2 cents thrown in?
Unemployment is good for jobs sites. Bring on a recession and then some. Even a perceived recession will be good for some businesses. Every time somebody loses, somebody else wins.
VCs should look outside of the U.S. market where a major growth in Internet is happening.
@13…different markets are affected differently. i.e. take financial industry in NYC…with Bear Stearns crapping out I’m going to guess that its much harder finding a job. Programming in SV on the other hand probably won’t get affected that much, since you have plenty of VC funded companies who don’t really care about recession since they aren’t making any revenue one way or another
Thanks for the article – it’s helpful for me as an entrepreneur to be aware of the trends. Just curious — what are the trends in angel funding? Do they parallel VC? It’s probably difficult to get statistics – maybe an informal sense of it would be the best that can be done…
the sky is falling!
This article would have been damn funny if written after Q406 (same downturn then as now) or, in the case of internet-specific investments, Q207. For the latter category, which as *everyone* knows is where the real bubble is, Q108 was the second highest quarter of investment activity ever. Que slowdown?
I’m not arguing that a recession won’t impact investments. VCs are the ultimate herd. However, one quarter does not a trend make.
Hope that it’s not the Great Depression
those are pretty graphs
let me stick my head in the sand and go la la la la la
slow down ? no it’s cyclical. I guess it’s hard to face reality when it affects your livelihood.
Really ? Who cares? Starting a new online company is so cheap that most traditional VCs offer more money than you need.
Man, some folks seem to be able to find something bad about almost anything. The news of an overall downward trend in VC funding is just a reflection of market insecurity and a general feeling of doubt that is gripping not only banks, but private investors like VCs. If what Wall Street sells to us little people is true, over time, things will trend upwards and we’ll all be richly rewarded in our golden years, if we make it to them.
Great post.