A Glimmer of Hope in VC Financing
Bill Warner Tuesday, August 11, 2009
In its second quarter Venture Capital Survey of venture financed companies in Silicon Valley, Fenwick & West reported some brightening of venture deals.
Financing summary
The number of down rounds in the second quarter exceeded up rounds 46 percent to 32 percent. It looks like bad news, but this is an improvement over the first quarter which was 46 percent to 25 percent. The difference is that flat rounds decreased from 29 percent to 22 percent. Although this is the second time that down rounds have exceeded up rounds since 2003, it does signal that the bleeding has started to subside.
However prices continued to fall, with a 6 percent decline in the second quarter, which compares to 3 percent in the first quarter. This two represents the second time that there was a price decline since 2004.
Other indicators
Dow Jones VentureSource reported that the amount invested by VC’s in the U.S. in 2Q09 was approximately $5.3 billion in 595 deals, an increase from the $4.0 billion invested in 680 deals in 1Q09, but a significant decline from the $8.3 billion invested in 726 deals in 2Q08.
The health care industry received 42% of 2Q09 investment, and information technology attracted 37%, the first time on record that quarterly investment in health care exceeded investment in information technology.
Fundraising by U.S. venture capitalists was $1.7 billion in 2Q09, which was the lowest amount raised in a quarter since the first quarter of 2003.
There were 67 acquisitions of venture-backed companies in the U.S. in 2Q09, for a total of $2.6 billion, a decline from 70 transactions totaling $3.4 billion in 1Q09 and a significant decline from the 89 transactions totaling $6.5 billion in 2Q08. This was the lowest dollar volume of acquisition transactions since 1999. There were three IPOs of venture-backed companies in the U.S. in 2Q09.
Of course, one point of change doesn’t yet indicate a trend, but these numbers do signal a curbing of the decline of venture capital financing. Let’s look forward to the next quarter being even better.
Filed Under: Angel Investment, Financing a Company, Managing Business Financials
Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the Chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.
Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the Chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.
