VC investing slows to crawl during first quarter

Latest PriceWaterhouseCoopers Moneytree report shows VC investment at lowest level in a decade.

Venture capital investing in the U.S. has dropped to its lowest level in more than 10 years, according to the latest Moneytree report by PriceWaterhouseCoopers and the National Venture Capital Association. The report says that venture capitalists invested about $3 billion in 549 deals in the first quarter of 2009, a 47 percent increase in dollars from the fourth quarter of 2008.

"It’s no surprise that venture capital investing dropped in the first quarter," said Tracy

Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers LLP. "Given the economic turmoil that began in the third quarter of 2008 and continued on into 2009, it’s not unexpected that the VCs would pause to assess the impact on their portfolio companies before again looking forward to their next investment."

Wisconsin and the Midwest were no exception.

The state only saw one VC investment during the first quarter, a $2.89 million placement, the report states. There were three VC investments during the fourth quarter of 2008, ranging from $1.975 million to $18 million.

The Midwest had 41 VC investments in the first quarter of 2009, down from 69 investments during the fourth quarter of 2008.

“These numbers clearly demonstrate that the venture capital industry is not immune from the current economic downturn, said Mark Heesen, president of the NVCA remarked.

“Venture capitalists have slowed their investment pace in order to work with existing companies that are not able to exit the venture portfolio due to the shuttered IPO window and the weakening acquisitions market.”

However, the NVCA believes market conditions will improve, Heesen said.

“We would expect a mild and steady increase in investment throughout the rest of the year, particularly if the exit pipeline is allowed to clear,” he said.


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