U.S. venture firms invested $17.7 billion into 2,795 deals last year, a 37 percent slide from a year ago that hit the lowest level since 1997, according to a report from PricewaterhouseCoopers and the National Venture Capital Association.
"The venture capital industry had no choice but to slow the investment pace in 2009," NVCA President Mark Heesen said in the MoneyTree report. "The weak exit environment resulting from an unstable pubic market combined with a challenged limited partner base sent a strong message to the venture community to pull back the reins -- and VCs listened."
The biggest sector to emerge, in dollars and deal terms, was biotechnology, which declined by 19 percent but boasted $3.5 billion in 406 deals for the year. No. 2, in dollar terms, went to software investments, which saw a 40 percent decline of $3.1 billion in 619 deals in 2009. The No. 3 spot went to medical devices, whose funding declined 27 percent to $2.5 billion.
Investments in so-called clean technology took a huge hit. Funding to companies fell 52 percent to $1.9 billion in 185 deals for 2009 compared with a year ago.
Internet investments, all the rage for more than a decade now, also took a hit. Venture firms put $2.9 billion on 629 deals, a 39 percent drop in funding from last year.
The only category to not see double-digit funding declines was networking and equipment. The investment category dipped just 5 percent in 2009 from a year ago.
Measured by investment stage, early stage investments saw the least effect while later stage investments saw steep declines. Seed stage investments actually increased 2 percent to $1.7 billion in 2009.
Early stage investments dipped 13 percent to $4.6 billion. Expansion stage investments dropped 47 percent to $5.5 billion.
Source : Red Herring, 22 January 2010
