Summary:
According to Dow Jones VentureSource, Q2 2008 VC investment in US companies is down by 12% from last year, as opposed to flat according to an NVCA report. The number of deals is at its lowest in three years, and the majority (54%) of deals were later-stage. Worst hit sectors are healthcare and IT (with the exception of IT services, e.g. Web 2.0). Energy and cleantech, on the other hand, posted record quarters. The top three venture capital deals in the second quarter were all solar companies. According to Dow Jones VentureSource, the drop isn't too significant, deal activity and investment are still considerable. VCs aren’t consumed about the darth in IPOs and acquisitions. They’re focusing on what’s next – and that’s reflected in the healthy early stage investment we’re seeing in areas like renewable energy, information services and business support services. (Published: 19/07/08)
Notes:
- Q2 2008, US VC investment:
- VentureBeat: Dow Jones research on venture investments has generally been the more meticulous over the years
- 602 deals
- lower than any time since 2005
- later-stage deals continue to attract the lion’s share of venture capital
- $3.48b (~54% of the quarter’s investment total) put into 225 rounds
- pushed the median deal size of a later-stage round to a record $12 million in the first six months of 2008
- first sign of a downturn in the VC sector
- if continues, will mean VC backed start-ups may have to turn frugal, shed jobs or take other moves to survive in more leaner times
- healthcare investments: took particular beating
- Q2 2007: $2.53b invested in 181 deals
- Q2 2008: $1.98b invested in 149 deals
- down 22%
- deal flow is at its lowest level in three years.
- IT industry
- saw deal flow drop 27 percent from 390 in Q2 2007 to 286 in Q2 2008
- lowest deal count since the first quarter of 1997
- investments down 26 percent from nearly $3.50 billion to $2.60 billion
- the lowest quarterly investment total since 2003
- information services sector
- includes the majority of today’s “Web 2.0” companies
- only area within IT to see positive gains
- $688 million invested in 80 deals
- a 20 percent increase over the $572 million invested in 94 deals during the same period last year
- one bright spot: energy and cleantech
- energy and utilities
- Q2 2008:$817m invested in 32 deals
- Q2 2007: $314m invested in 23 deals
- up 160 percent
- renewable energy
- top three venture capital deals in the second quarter were all solar companies
- Jessica Canning, Dow Jones VentureSource:
- "drop isn't that significant"
- “While the U.S. investment total is down compared to last year’s impressive second quarter, we still saw steady deal activity and investment in the first half of the year, which is encouraging. Venture capitalists commonly take the long-view when it comes to investing. While IPOs and acquisitions may be rare now, VCs aren’t consumed about that. They’re focusing on what’s next – and that’s reflected in the healthy early stage investment we’re seeing in areas like renewable energy, information services and business support services.”
