Venture Capital trends: sorting through Q2 2009 statistics

Everybody agrees that the venture capital industry is going through it’s worst fundraising  time since 2003, but the statistics regarding deal investing vary. Let’s see if we can sort through conflicting Q2 2009 statistics.

VentureSource and PwC/NVCA, two top references to track VC investing, published their Q2 reports on US VC investing earlier this week. According to VentureSource, Q2 saw 595 deals for a total of $5.27B. According to PwC/NVCA, Q2 saw 612 deals for a total of $3.7B. While the number of deals is similar, the amounts are clearly different. By studying the reports further what we can however see that they agree on the key trends:

  • After several quarters of decline, investing rebounds in Q2 2009
  • In spite of the improvement, investing is still down to the levels of 2005
  • Healthcare is the strongest industry, online services is the weakest
  • Geographically, Washington State seems to be going strong

The key trends above can give us a solid understanding about the current state of the VC industry but we still have to be cautious. Unlike funding, which is in the hands of the limited partners, investing depends on the VC firms and the available deals. It is also worth noting that everywhere else around the world the rebound did not happen yet. VC investing actually saw a decline of 63% in Q2. We will probably have to wait until 2010 for that rebound to happen.

Note: this article was crossposted on Seeking Alpha on 7/24/09.

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