US Venture Capital Investing Down 8% in First Half
US venture investing declined again in the second quarter and year-to-date numbers are off 8% for deals and 5% for dollars invested from the first half of 2007, according to the latest data from VentureSource.
Dow Jones VentureWire (subscription required) reports investors pumped $13.9 billion into 1,241 deals in the first half of this year.
How much the slow economy and absence of venture-backed initial public offerings had to do with the decline is unclear, however, because venture investors say their portfolio companies generally are in good shape and that the lack of liquidity, while worrisome, could be a short-term problem.
“What tends to slow people down is if their portfolio companies are really, really struggling,” said Battery Ventures General Partner Tom Crotty. The firm has just finished its first-half portfolio review. “I’ve been pleasantly surprised at the good execution of the portfolio against their revenue plans,” he said. “That keeps people in a reasonably bullish mindset.”
On the flip side of the equation, venture firms have plenty of capital to deploy.
Venture capital fund-raising in the first half was up 15%, to $11.5 billion, according to sister publication Private Equity Analyst. It’s also noteworthy that the number of active venture investors in the U.S. continues to decline as poor performers wind down. This could be having some effect on the deal pace.
The energy and utilities sector was one of the few bright spots in the first half, while information technology saw a significant drop and health care leveled off in the second quarter after a very poor first quarter.
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