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Summary:

Venture firms were still shy about making investments in startups during the second quarter of 2009, and the industry as a whole will likely return to 1996 funding levels, with VCs investing between $11 billion and $14 billion for the year, according to the MoneyTree Report […]

nullVenture firms were still shy about making investments in startups during the second quarter of 2009, and the industry as a whole will likely return to 1996 funding levels, with VCs investing between $11 billion and $14 billion for the year, according to the MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association. Venture capitalists put $3.7 billion in 612 deals in the second quarter of 2009, a 42 percent drop in deals from the same period last year, and a 51 percent decrease in dollars, based on data provided by Thomson Reuters.

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The decrease in fundings during the first half of the year are a sign of a dismal exit environment and the economic malaise, and may also represent a permanent shrinking of the industry that several experts have called for in the last nine months. Judging by the types of companies still receiving money, the downshift in investment seems to have caused the cleantech industry to see the largest fall, while investments in the web and information technology stayed a little more steady. Perhaps venture firms are retreating to the types of investments they know.

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Photo by bigmick via Flickr.

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  1. Jeffrey McManus Monday, July 20, 2009

    Yeah, so, a one-month increase isn’t really a trend.

  2. FateMaster Tech News » Venture Capital Dollars Stabilize in Second Quarter at Mid-1990s Levels Monday, July 20, 2009

    [...] VC Funding Heading Back to Pre-Bubble Levels [...]

  3. Tech News » VC investing rebounds in Q2, still at mid-1990s levels Monday, July 20, 2009

    [...] VC Funding Heading Back to Pre-Bubble Levels [...]

  4. David Robins Tuesday, July 21, 2009

    When the economy gets better the funding will increase too. So far the stock market has lead the economy. Hopefully this is sign of better time are comming back!

  5. Some people lag the market. Some try to figure out how to get ahead.

    Some just sit and wait and wonder what that was that just whooshed by?

  6. Tech News » Lofty valuations aren’t over for everyone — Ning raises $15M, valued at $750M Tuesday, July 21, 2009

    [...] VC Funding Heading Back to Pre-Bubble Levels [...]

  7. FateMaster Tech News » International venture capital plummets 63 percent in Q2 Thursday, July 23, 2009

    [...] VC Funding Heading Back to Pre-Bubble Levels [...]

  8. Can the U.S. Government Help Cloud Computing Reach a Tipping Point? Thursday, July 23, 2009

    [...] has been driving technology trends. But with the timing of an economic recovery still uncertain and VC dollars hard to come by, it may be the Feds’ turn to set the stage — and technologies that fall under the [...]

  9. Credit Cards Increase Risk of Failure for Startups Thursday, August 6, 2009

    [...] the report makes clear that a higher balance is linked to outright failure. And it comes just as venture firms are putting less money into startups and banks are shying away from small business loans — forcing entrepreneurs to turn to credit [...]

  10. David Moskowitz Friday, August 14, 2009

    I don’t think anyone is saying the 1 month increase is a trend. The seed/early stage amount is still in line with patterns from the past 3 years. Only the expansion and later stages show dramatic changes from the past. Perhaps, VC’s are giving less time to companies to prove themselves, which means acceptance of less risk which is a good thing overall for everyone. We’ve seen what lack of risk aversion practices have done to the dot coms and real estate markets within the last 10 years. It is interesting that the “dismal exit environment” may be the key to lack of 2nd and 3rd stage funding. This may be an undertone that investors are looking to flip companies in even shorter time frames than in the past. Could this pressure to turn a profit more quickly mean even longer work hours for software developers, additional strains on work/life balances, etc?

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