Venture capital firms tightened their purse strings in the fourth quarter of 2008, according to the latest MoneyTree Report released by the National Venture Capital Association and PricewaterhouseCoopers. The total dollar amount invested in venture financings was $5.4 billion, down 33 percent from the fourth quarter of 2007 (when it was $8.09 billion) and down 26 percent from the third quarter of 2008 (when it was $7.3 billion). For the entire year, the total venture capital invested into startups was $28.3 billion, down 8 percent.
The decline in investing mapped the decrease in exit options, even though VCs are supposed to have a 5 to 7 year investment horizon.
More money continued to flow into later stage deals. And broken down by sector, venture dollars going into Internet deals fell 26 percent quarter over quarter as well to $787 million across 170 deals (a 20 percent decline from the third quarter). Even investments in clean tech startups dipped 14 percent sequentially to $909 million across 62 deals. For the year, Internet financings were pretty much flat at $4.9 billion, while the dollars going into clean tech deals increased 52 percent to $4.1 billion.
The ten largest venture fundings in the quarter were:
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Solyndra: $219 million
Pocket Communications: $100 million
Silver Spring Networks: $75 million
Bolex Therapuetics: $60 million
i/o Data Centers: $56 million
Boston-Power: $55 million
Pacira Pharmaceuticals: $55 million
Bayhill Therapeutics: $54.3 million
Kosmos Energy: $53.9 million
Calisolar: $51.8 million
Interactive iCharts and the entire slide deck is embedded below:
Venture Capital Investement Data 2008 – Get more Business Plans
Not a big surprise with the economy…
Yes, but compare the quality of those Start ups that are NOW receiving funds.
As VCs get more conservative with allocating their capital, the drive will be on those Start ups to create top notch business models and research and produce a product or service that really fills a void
no
does this mean there may never be another facbook? feel sorry for all the college kids with tech degrees and tech ambitions. startups will virtually be gone by 2010. startins will rule the net. users and businesses will position themselves with the established mainstream destination sites.
CapitalDomain.com – equity experts
ut oh! some people might have to get real jobs
Why would you invest in a startup when you can buy CitiGroup at $3.43 a share or AMD at $2 ???
The law of conservation of energy says that energy doesn’t simply disappear.
These trillions lost are not simply gone. They were simply squandered by really, really stupid people.
If you think you can beat the upcoming market upturn with a startup, ANY startup. I don’t care if you have the next Skype, you are insane. I wouldn’t even bet on my own startup over a NASDAQ tech sector recovery.
Chris – Good point. There are a lot of way undervalued assets out there. I replace CitiGroup with GE on your list of buys. I think there are still a lot of unknowns with financials.
http://picasawe...738096264591826
Dude, my pie is all green, and will only get more severely greener as we go towards Q2 which is the expected recovery stage. Granted Sun will only turn in 010, but that’s ok. I’m not in a hurry.
With that said, how could piloting a startup be any better than this?
The money was not lost. It’s still there. It’s still going to go back into the market. People are animals. They get scared just like animals. Once the fear subsides the money starts flowing again. The winners are clear thinkers that don’t give into their animal instincts.
I’m still doing my startup, but the hell if I’m going to put most of my free cash there.
Nothing can beat buying up proven value at bargain basement prices.
I bet 99% of those missing VC investments are going towards hedge funds and buying up depleted stock.
Disclaimer: my opinion is solely my own and offered with no warranty what so ever.
I dunno how many people here have dogs, but when dogs get really scared, they pee themselves.
Investors peed themselves. Eventually they realize it’s the same environment they left, and they come back slowly and gradually.
(my opinion with no warranty again)
There is no way a startup can ever beat the potential of any tech stock barring the ones below $2. Once the market is good and rebubbled, the mobile app startups(and only the mobile app startups) will start to get series A again.
What does money have to do with energy? Here’s a hint: energy is measurable, quantifiable and real. Money is just a concept. The trillions you are talking about in recent years have been generated by financial products which simply obfuscated the fact that they were duplicating existing debt without actually creating value. Now the government is doing its best to prop up the bubble, so you may be right to buy stocks, but you’re an idiot if you think paper profits equate to real life value.
news flash?
no comment!
The first thing that smart VCs did when things went south is to make sure that their portfolio companies could make it till things recover, 18-24 months.
But then they still need to look around for deals. They have a limited amount of time to show return on investment, and sitting on their hands is not really an option. They can wait on the side lines for 6-9 months, but then need to start investing the money that they’ve raised in their current fund.
Raising new funds though, is a differetn story.
VC’s money is raised exclusively from close business partners and friends. There are no “public” or anonymous VC funds.
With that said, a VC fund can just as easily become a hedge fund.
Where they are investing for ROI, but not in startups.
I agree with Dror, VCs need to spend their money sometime in the future.
The deal for new businesses is clear(?) :
1. Develop a real service with a concrete revenue model.
2. If possible use your own money in the beginning – next 12-18 months.
3. Partner with a company that can help you take your “idea” to a concrete product.
4. Outsource the development & testing work to a company in India /China that can work with u (at a third of the cost) in an agile mode to build your product. Picking the right vendor is VERY important. Avoid the big players…
5. Have a clear exit strategy defined for your investors.
6. Did I mention build a real service with a concrete revenue model?
Position yourself for the time when VCs will spend.
Agree with (1) being the most important, however, lot of startups get funded without this (still).
Overall though, only a decrease of 8%, that’s not terrible considering the economy. You’d think that they would be more hesitant to invest in a climate like this. I guess they realize that this is still where the best companies are made. They also seem to be willing to give second (or third) rounds to their perceived “winners” so that they don’t go under.
twitter.com/dankalmar
VCs don’t have a big pile of money sitting around that they have to spend. They have a big pile of commitments that when they make a capital call won’t come through. So they sit on their pile of commitments because having a capital call fail is very embarrassing.
VCs are supposed to have a 5-7 year time frame? That’s funny. Their time frame is the cycle until the next round of funding so they can bring in the next set of VCs.
geez thats scary to see
-Jim
http://www.movi...nlineforum.com/
(just getting started so check it out)
I’d love to see a follow up article. Will the quality of VC investing improve over the first two quarters in 2009? Maybe it’s time some VC’s throttle down and scrutinize their investments a bit more? Or maybe this will push funding to companies that are trying to change the world (see http://www.akoha.com) rather than the quickest flip to make FU money. I think this could be a huge change the better in our industry. I guess I’m just a “glass is half full” type of guy.
In many of the charts – including in the docstoc embedded report – levels in 2008 look a lot like 2006. That’s less of a rewind than the stock market took in 2008 (when it went back to 2003).
But 2009 may unfortunately bring that difference into balance.
I think/hope that good ideas will still get funded. Obviously valuation terms will be less favorable for entrepreneurs. But if you have a good idea and that you believe in and know how to monetize, keep going. That’s my motto.