First Quarter Venture Investments Plunge 50 Percent Nationwide

4/18/09Follow @bvbigelow

There was a time when venture capital partners used to tell me that venture investing is unaffected by the overall economy, because it takes five to 10 years to realize returns in startup investments. In January 2008, Deepak Kamra of Menlo Park, CA-based Canaan Partners said, “Most venture-backed companies don’t have a lot of debt, so they’re not really directly affected by the credit crunch.”

Nobody’s saying that anymore.

As expected, just-released data from two surveys shows that venture investments throughout the United States plunged by 50 percent during the first three months of 2009—marking the lowest investment level in at least 11 years.

Venture capitalists invested nearly $3.9 billion nationwide during the first three months of 2009—a 50 percent decline from almost $7.8 billion that was invested during the first quarter of 2008, according to data from Dow Jones VentureSource. The survey counted just 477 deals during the first quarter, compared with 706 deals in same quarter last year. DowJones VentureSource also provided regional data for the quarter in Xconomy’s cities.

—New England venture investments declined by just 15.5 percent, a relatively strong showing compared to the broader trend nationwide. The survey showed $594.4 million was invested in 61 deals during the first quarter of 2009, compared with $703.3 million that went to 83 startups in the same quarter of 2008.

—In San Diego, venture funding collapsed in all sectors except life sciences. The Dow Jones data shows 15 companies getting $194.6 million during the first quarter of 2009, a 34 percent decline. On closer inspection, however, deals involving San Diego life sciences startups accounted for $190.6 million—nearly the entire total! Only one IT deal was reported in San Diego during the quarter, for $4 million.

—Washington state VC investments plunged almost 54 percent in the first quarter, with 22 startups getting $114.6 million. Venture investments remained divided fairly evenly, though, with life sciences getting $33.5 million and IT startups getting $59.5 million.

vc_chart_1q_2009

Retrenching was apparent in the nationwide data across almost … Next Page »

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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