By Donald Zuhn --
Late last week, PricewaterhouseCoopers and the National Venture Capital Association (NVCA), a trade association representing the U.S. venture capital industry, announced the release of their quarterly MoneyTree Report (based on data from Thomson Reuters), which showed that venture capitalists had invested $3.0 billion in 549 deals in the first quarter of 2009. The first quarter figures were down 47% in terms of dollars invested and down 37% in terms of the number of deals as compared with the fourth quarter of 2008 ($5.7 billion invested in 866 deals), dropping to levels last seen in 1997.
Tracy Lefteroff, global managing partner of the venture capital practice at
PricewaterhouseCoopers LLP, said the drop was no surprise given the economic turmoil of the past two quarters, adding that "it's not unexpected that [venture capitalists] would pause to assess the impact [of the recession] on their portfolio companies before again looking forward to their next investment." NVCA president Mark Heesen, however, stated that "those venture firms that have the ability to invest at this time are doing so as there remain entrepreneurs with game changing technologies waiting to be funded," and noted that the trade association was "not forecasting levels to continue to fall further." He predicted "a mild and steady increase in investment throughout the rest of the year."
According to the MoneyTree Report, first quarter declines were spread across almost every industry sector. The life sciences sector (biotechnology and medical devices) saw a 40% decline in dollars (to $989 million) and 31% drop in deals (to 133) as compared with fourth quarter numbers. However, the declines seen for the life sciences sector were not as bad as those seen for the software sector (dollars down 42% and deals down 34%) and clean technology sector (alternative energy, pollution and recycling, power supplies, and conservation; dollars down 84%), internet-specific sector. Investments in life sciences companies constituted 33% of all investment dollars and 24% of all deals, which the report noted was in line with historical norms. Surprisingly, the only sector that saw increases in both dollars (up 26%) and deals (up 21%) in the first quarter was the sector that many have blamed for the current economic crisis: the financial services sector.