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 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.
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.