First Quarter Venture Investments Plunge 50 Percent Nationwide

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

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Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.