The Economy Hits Venture Capital: Latest trends show no growth
July 28 2008 | 0 comment(s)
The National Venture Capital Association has put out some interested statistics about the state of play in venture capital in the US. Interestingly, it shows a complex picture. For Q2 2008 the amount invested when compared to Q1 ($7.5B into 977 deals) is basically flat - with the most growth happening in the cleantech space.
In fact, Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers in the NVCA report, believes that investing in 2008 is on par to hit 2007 marks ($30B). The news is not all as easy to accept though. There is a significant drop in the number of IPOs, meaning that VCs have to wait longer for returns and will likely have to pump more money into their portfolios. And there are, of course, regionally fluctuations. For example there was a 15% drop in dollars (year on year) invested in the DC region.
Our advisor, the inimitable Roger Novak of Novak Biddle in the DC region was quoted in the Washington Post commenting in response to the current climate saying "It's really a question of staying the course and surviving. This is the worst we've seen."
The article goes on to talk about how it now takes on average 8.6 years for a venture-backed company to IPO, more than twice as long as a decade ago, with no reason to believe things will improve anytime soon. The major downside of this is that when VCs need to inject more money and time into these companies, there is less money and time to spend on new ones. This is bad for everyone. This does not seem to be an indication of a big implosion within VC, but a vision of a future with a bit of belt tightening. The main consensus seeming to gravitate towards holding on tight for a bumpy ride.
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