Blogging the Q4 2008 MoneyTree Venture Capital Report: Part One
I have spent most of this morning crunching the numbers the just released (January 24) Q4 Money Tree Report gathered by Thomson Financial and released through PriceWaterhouse Coopers and the NVCA. PriceWaterhouse doesn’t have the report up yet on the official Money Tree site, but you can download it from NVCA here. Charts can be found here.
As you might expect, VC funding for 2008 was way down, for the first time in five years, and Q4 money dried up like a liquor bottle in an AA meeting. But there are some genuine surprises, and I’ll point them out in my analysis after the break.
At the 10,000 foot view, venture capitalists put $28.3 billion dollars into 3,808 deals in 2008, representing an 8% decrease in overall funding and a 4% decrease in deals. Put in the language we all speak, venture capitalists sent about 1 in 20 people packing whom they otherwise might have funded as little as a year ago (that’s not a very sharp decrease in your odds if you’re in the market for venture capital).
All types of venture capital investment across all types of industries saw a decline in 2008, except for:
The increase in seed stage companies makes a great deal of sense. While those investments carry the highest amount of risk, because the companies technically have little value, VC’s are able to grab a big chunk of the company at sometimes rob-the-train prices.
By sector
In a separate report released on January 19, Thomson Financial released data about 43 venture capital firms. In the fourth quarter, these 43 firms raised $3.4 billion as opposed to raising $8.4 billion in third quarter 2008.
The NVCA has this to say about the drop in funding:
The drop in venture capital fundraising activity in the fourth quarter is not surprising for two reasons. First, the market uncertainty has compelled firms that were planning to raise a fund in late 2008 or early 2009 to hold back on fundraising efforts until economic conditions improve and institutional investors can recommit with confidence. The second and less obvious reason is that many venture capital firms raised money in the last two years and are focused on deploying those funds. With some notable exceptions, we can expect this slower pace to continue well into 2009.
Now, I’ve been crunching these numbers to get at some takeaways for entrepreneurs, and some of the patterns emerging are interesting. My analysis of these numbers tomorrow.
