Is Venture Up or Down? Dow Jones Survey Shows Retreat in Q3 VC Activity, Flatly Contradicting Rival Report

10/17/09Follow @bvbigelow

After reporting earlier this week that third-quarter venture capital investments were up 14 percent nationwide over the second quarter—based on data from New York-based ChubbyBrain—we now have data from Dow Jones VentureSource for the same period that shows almost the opposite: a 5.5 percent decline in venture capital deployed during the quarter.

Instead of the $6 billion going into 680 deals that ChubbyBrain counted, Dow Jones VentureSource found just $5.1 billion was invested in 616 deals during the three months that ended Sept. 30. Dow Jones says the dollar figure is down almost 6 percent from the $5.4 billion (595 deals) it counted in the preceding quarter—and a 38 percent drop from the $8.2 billion invested in 663 deals during the third quarter of 2008.

As you might expect, Dow Jones VentureSource also reached contradictory conclusions. “The slow recovery we’ve seen for venture capital has faltered,” says Jessica Canning, director of global research for Dow Jones VentureSource, in a statement. “As liquidity and fundraising lag after the economic meltdown in 2008, investors have no choice but to keep a tight rein on investments until the industry is on more solid ground.”

ChubbyBrain, which showed a third quarter year-over-year decline of 16 percent, concluded that its data “has strengthened the case for cautious optimism…This positive momentum has been further reinforced by the brighter outlook in public equity markets and even some IPO success for VC backed companies.”

Who are we to believe?

The venture surveys began as a bit of cagey marketing by rival accounting firms PricewaterhouseCoopers and Ernst & Young. The competing surveys have changed through the years, mostly by expanding and adding partners, and in the process they have become a running battle of one-upsmanship, exclusive media partnerships, and market branding. This is evident in the insufferably long brand name that news organizations are required to use for “The MoneyTree Survey from PricewaterhouseCoopers and the National Venture Capital Association, based on date from Thomson Reuters.”

DowJones3Q09The other major VC survey now comes from Dow Jones VentureSource, that is, until young Turks at ChubbyBrain launched their information service earlier this year.

I’ve worked for a long time with the two original competing VC surveys, and I’ve grown accustomed to seeing occasionally significant variations in … 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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