US Venture Capital Deals Dip to 4-year Low in Fourth Quarter
It comes as no surprise that venture capital investing in the U.S. fell in the fourth quarter to the lowest level in four years.
Dow Jones VentureWire reports that in the first full quarter since Lehman Brothers Holdings Inc. collapsed, venture-backed companies closed 554 financings, the fewest since the third quarter of 2004, according to data from industry tracker VentureSource, also owned br Dow Jones. The number of deals was down from 620 in the prior quarter and 718 in the fourth quarter of 2007. The drop brought last year’s deal total to 2,550, the lowest since 2005.
The amount invested in the fourth quarter also fell substantially from the third quarter, to $5.5 billion from $7.5 billion. The total for the year was $28.8 billion, below 2007’s $31.4 billion but still slightly ahead of 2006.
The number of deals fell in all industry groups from the third quarter, save for energy and utilities, which recorded 34 deals in the fourth quarter, compared with 32 in third. Information technology remained the largest sector, with 266 deals in the fourth quarter. But this was down from 290 in the third quarter and off significantly from 355 in the fourth period of 2007.
Declining areas are ones where VCs have historically focused such as software, communications, biotech and medical devices that depend on Fortune 1000 corporate buyers, said John de Yonge, research director for venture capital and cleantech at accounting firm Ernst & Young.
Showing a notable increase from the fourth quarter of 2007 besides renewable energy was media content and information, which favors capital-efficient business models and looks to deliver online advertising to consumers, de Yonge said.
He also said he was encouraged to see that VCs had financed 50 companies at the start-up stage in the fourth quarter of 2008 versus 33 in the same quarter of 2007.
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