VCs are feeling the heat from the recession. Money, both outgoing and incoming, isn’t drying up completely, but the numbers keep going down. In terms of exits, during the first quarter of 2009 there were zero venture-backed IPOs and only 56 M&A transactions, according to the National Venture Capital Association, down from five IPOs and 106 M&A exits in the first quarter of 2008. The disclosed value of those M&A deals in the first quarter of 2009 was $645 million, down from $4.5 billion a year ago.
And money going into venture funds from limited partners has also plummeted over the past year. Only 40 funds raised new money during the quarter, down from 71 the year before (1Q08) and 47 the previous quarter (4Q08). In dollar terms, the total raised in the first quarter was $4.3 billion, down 39 percent from the year before (1Q08).
And now we are waiting to find out how much money VCs put into startups during the first quarter. Mind you that VC investing for the fourth quarter of 2008 already hit a low, with the total dollar amount invested in venture financings at $5.4 billion, down 33 percent from the fourth quarter of 2007 (when it was $8.09 billion). That number was also down 26 percent from the third quarter of 2008 (when it was $7.3 billion). We’re not too confident that the report card for the first quarter of 2009 will be any better. Considering the continued drops in exits and fund inflows from LPs, the number might not be pretty. So how bad will it be? Take your guess in the poll below.
Corresponding with the capital markets, my guess is down 50% from Q4 ‘08.
Here is a scientific project done on the effect of the crisis on venture capital: http://papers.s...ract_id=1373723 – Rather interesting!!
At a roundtable event in NYC last month, Danny Schltz of DFJ Gotham had some hopeful thoughts. To paraphrase his words: Although overall VC funding may drop a lot, me-too start-ups that were able to get funding during richer times are the first ones to get starved of money. It may actually be a great time for truly unique start-ups to stand up and be counted.
True or not, only time will tell.
At a roundtable event in NYC last month, Danny Schltz of DFJ Gotham had some hopeful thoughts. To paraphrase his words: Although overall VC funding may drop a lot, me-too start-ups that were able to get funding during richer times are the first ones to get starved of money. It may actually be a great time for truly unique start-ups to stand up and be counted.
True or not, only time will tell.
http://www.snazl.com
Its soo sad whats happening in this country. now is the time to actually start startups. the economy is not “bad” its just starting a new cycle, this is when money goes from old hands to new hands, when the world changes its laws on media, fuels, etc. Instead of the country letting those things happen (yes they hurt people are loosing their jobs, money etc) they regulate the economy even more, so the change that is happening wont happen with full benefit, because when we get back up it will be almost impossible for an entrepreneur to make it with all those extra regulations and taxes, were becoming just like Europe and trust me I come from there its almost impossible to make something new there, that’s why me and soo many millions of people came to America for the great FREE MARKETS, now its a joke Obama or any other president will not save the country the only “thing” that saved and helps people are companies they are the ones who give us jobs, they are the ones who feed our children, and of course who give us AMAZING products that make our life’s healthier, longer, funner etc.
From: Me a frustrated new American
I know I will get hate for this but Ayn Rand and the old Alan Greenspan made the most sense economically.
Enjoy your weekend every one:)
we’re in a DEPRESSION. we need to build startups that people NEED.
@Michael,
Regulation had nothing whatsoever to do with the decline in VC investing. Poor returns over the last decade, combined with too much capital fueled by a market with loose credit led to investment levels at unsustainable levels. This fact combines with a limited market for exits due to Sarbannes-Oxley, which was written into law by “free market” purists post 911.
As a new american, welcome. As an american who has thrived in our economy, i’d suggest you learn econ 1. There is no “hate” in your comment, nor is there any in mine. You’ve simply misinterpreted what has happened, and what is currently happening. Entrepreneurship is now thriving, but the difference is that startups today must create economic value, and have a path to profitability. Had these basic economic principals been adhered to by the VC industry over the last decade, they would be seeing better returns today.
VC’s don’t create jobs, innovations that address market needs yield economic value and hence job creation. Marginal tax increases do not impede this fact, they never have.
Best wishes for success in the US.
Very true what you say about entrepreneurs being the real engine of prosperity. Paul Grahm outlines the need for these people in his book Hackers and Painters (another good read for anyone interested in economics and technology).
“You need rich people in your society not so much because in spending their money they create jobs, but because of what they have to do to get rich. I’m not talking about the trickle-down effect here. I’m not saying that if you let Henry Ford get rich, he’ll hire you as a waiter at his next party. I’m saying that he’ll make you a tractor to replace your horse.”
http://www.paul...am.com/gap.html
I guess we’re all supposed to know what a VC is?
Uh, on this particular blog (TechCrunch), I would have to say, “yes, you are supposed to know”.
I’d say it’s sub 2 billion. 100% sure. Final answer.
@ punger:
“…I guess we’re all supposed to know what a VC is?”
This stands for “Venture Capitalist”, as one who invests risk capital in a business in return for a significant slice of the company. An exit strategy is also agreed where it can be expected that they will then realise a healthy return on their investment – typically anything between a three and seven year time-frame.
There are also other types of investor, such as business angels, B2B, (etc), involving different types of contractual agreements, but many use “VC” more generically to identify an investor looking to inject risk capital into a business.
Silicon Valley China Entrepreneurship Forum(SVCEF), has a discussion on this topic recently.
Some people said that 2000-2010 is a decade of innovation desert.
http://www.svcef.org
I noticed that SVCEF’s listing of previous events dried up in September 2007, and have listed nothing further since that time.
I can’t help wondering whether it’s actively maintained nowadays.
VC’s still have a lot of money in the coffers and enough of them take longer-term views. I think investments will be down sequentially, but not much.