The MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association came out this morning. It shows that total VC financings in the third quarter were down 7 percent compared to the same period last year, to $7.1 billion. That is also down about the same amount from the second quarter. In the chart above, I’ve plotted the dollar value of VC investments for each third quarter going back to 2001, coming off the last boom, when $8.3 billion was invested in VC-backed startups. While $7.1 billion is still a healthy amount, you can see that this may be the first quarter of a significant decline in funding activity.
Update: Here is an interactive iChart with the same data as above (mouse over each bar for more info, and use the slider at bottom to change the time range):
If you zero in on Internet deals, VC funding declined 16 percent to $1 billion. Below is a chart plotting the sequential dollar amount going into Internet deals going back to the first quarter of 2002, when $1.3 billion was invested. (Sorry for the apples to oranges comparisons between this and the first chart, which just shows numbers from the third quarter of each year. The entire spreadsheet with all of this data and more going back to 1995 is embedded below).
Update: Here is an iChart showing the VC dollars going into Internet deals every third quarterm along with how much went into early-stage (”first sequence”) deals:
There were a total of 907 VC-backed deals in the third quarter, compared to 983 a year ago and 1,033 in teh second quarter (see first chart below, which is for the same time period as the first chart above). And the number of Internet deals was 194 in the third quarter, compared to 221 a year ago, and 251 last quarter (see second chart below, which is or the same time period as the second chart above):
Update: Here is another iChart comparing the number of all VC deals versus the number of Internet deals:
And just for some perspective, here are two charts showing Internet deals going back to the first quarter of 2000, when $12.4 billion (first chart) was invested in 900 deals (second chart).
VC Financings Spreadsheet - Get more Business Plans
See all
Post
am sure the worse is coming..give it time until elec is over
I don’t think the result of the election will magically repair the economy.
The 36 month chart showing the deal volume going back to Q1 2000 certainly puts things into perspective. Thanks for posting this.
Marcel
Please spend a little time and label your graphs, specifically the x-axis and series name.
Yes, I was in a rush this morning when I wrote this. (Saturday + two boys = not enough time to label charts). But I’ve added some iCharts that are not only better labeled, but can be explored interactively.
And for those who want more, all of the underlying data is in the embedded spreadsheet.
I’m predicting that the VC funding decline will be directly connected to the drop in impression based ad spending. Such a high percentage of VC-backed startups are built on the false notion that they can become profitable solely from advertising from ad networks. That simply isn’t a reality anymore considering the largest industries have dramatically cut their marketing budgets (i.e. Auto and Finance).
Useful stuff. I agree with Mike on that the x-axis on these graphs should be aptly labelled.
The x-axis on your charts shows serial numbers (1,2,3, …) and it is diffficult to make out the timeframe. You got to put the actual timeframe (months, years) to make it easier to read. Did you graduate from high school? Did they teach you how to plot a readable graph?
Any graphs on ” GOOD IDEA’S” there really not a lot of good ideas out there in this WEB2.0, at least WEB 1.0 was willing to take chances, VC’s don’t don’t that anymore. You might have a great idea, but unless you have your degree from Stanford you ain’t getting shit, and look how that’s worked out for the bay area
I wonder how much VC Financings is down in the UK!
Hey if you have a great idea that makes sense, I expect that you will be able to get it funded. Also you may not need as much capital these days with the decrease in spending.
Sorry I meant decrease in competition*
When will server cost and Bandwidth cost move with the market?
This is really a good sign. I mean less worthless start ups will make it to the light of day
Then again good ones may suffer too.
I’m starting to recognize how dangerous it is to allow auditing firms to look at one’s book. They can publicize your numbers without your permission. They both charge millions of dollars to audit and make money from selling your data.
Auditing firms are osshole
I agree that this is a good sign. People that saw dollars signs instead of useful software should leave the game and spend a few years paying the debt back and let us have free reign.
The sheer amount of startups dropping off should give us a solid 3-5 year span to make modestly large amounts of money just like at the end of 2000.
Bottom line is that if you are in a start-up situation, you need to be forward looking and build towards the next positive cycle, which will inevitably come around at some point.
On a positive note, the start-up I am involved with - Jemstep, Inc. - has raised some non-trivial angel funding; is hiring people; and will soon be renting offices in Palo Alto. Obviously we are keeping a keen eye on our budget, but we remain up-beat.
Its during times like these that great start-ups have even more chance of being noticed.
Kind regards
Kevin
Well, it’s not the end of the world, as Sequoia’s presentation said. Money still ARE invested and the only change is that VCs will fund the best ideas. It’s a normal (and perhaps a welcome) change that will reward the truly originally-thinking entrepreneurs and the more diligent VCs. It’s better for everyone, as there are just too many crappy startups out there.
Paul Graham’s last essay it truly inspiring for the ones who really have something good in their mind and got into the arena to make it happen.
Good luck to everyone!
This is not surprising. We all know we will continue to have a number of bad days with a few rebound days. Bottom line: the US markets are too unstable in the near future. Investors really need to make changes to their investing strategy if they have not already, especially since the market has not hit the bottom yet.. This means move money into T-bills and municipal bonds and invest some overseas to guard as a hedge against the coming inflation of the US dollar. I use offshore bank accounts for this and they have helped me. If you would like to learn more, feel free to visit my site.
Best,
Frank Miller
http://www.theoffshorebankaccount.com
Maybe your next VC will speak Hindi, Mandarin or Cantonese.
I don’t think this is necessarily a bad thing. There have been far too many VC’s funding startups with no real business plan. Now, maybe VC’s will do a little more diligence (like they should have been doing all along) and put money behind startups that actually have an idea how they’re going to return the investment.