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EJ certainly made the right moves. Self-investment in the book and iTulip! Well done 
VC investment in startups keeps falling
Deborah Gage, Chronicle Staff Writer
Saturday, April 18, 2009
Investments in startups by U.S. venture capitalists dropped dramatically last quarter to their lowest levels since the 1990s, according to two separate surveys released today.
All regions of the country and nearly all industries were affected, from software to Internet to life sciences to clean technology, an area that until now has been considered a good bet.
Dow Jones VentureSource reported a 50 percent drop in dollars invested compared with a year ago, with $3.9 billion going into 477 deals, the lowest level since 1998.
The MoneyTree Report tracked $3 billion invested in 549 deals, down 47 percent from the previous quarter, the lowest level since 1997. MoneyTree combines data from PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters.
Since so few companies are going public or getting acquired, venture capitalists are forced to hold on to the companies they already have, taking resources away from newer startups. Investments in early stage deals are down.
"If you're going to add a company it's got to be really good - it's got to warrant the time," said Steve Harrick, a general partner in Institutional Venture Partners in Menlo Park.
Entrepreneurs, meanwhile, don't like the lower valuations being offered by venture capitalists these days, and many are holding off on raising money, he said.
Despite the steepness of the decline, it still doesn't feel as bad as the dot-com bust, when the problems were caused by the same types of companies that took venture capital, said Noubar Afeyan, CEO of Flagship Ventures.
Still, too much money has been invested in too many clean technology companies, he said, and the investors backing out now are the ones who expected "a short-term pop" from an IPO or a high-visibility acquisition.
The venture industry can't supply enough capital to get clean tech products to market when companies can't go public, he said, so oil companies and utilities will need to step in and partner with startups, as some already have.
Still, two companies did manage to go public recently - one venture-backed - and there are several good companies waiting in the pipeline when the market does improve, Harrick said.
The Bay Area dominated venture investing as it usually does, although investment fell 57 percent from a year ago to $1.14 billion in 139 deals, according to VentureSource.
But dominant regions tend to become more dominant in a downturn, and half of the country's top 10 deals last quarter were in the Bay Area - Anacor Pharmaceuticals; SFJ Pharmaceuticals; Ardian, which makes medical devices; Obopay, which allows bill paying on mobile phones; and Twitter, MoneyTree said.
The most active investor, with 13 deals, was Draper Fisher Jurvetson in Menlo Park, VentureSource said.
E-mail Deborah Gage at dgage@sfchronicle.com.
http://sfgate.com/cgi-bin/article.cg...BU22174C98.DTL
VC investment in startups keeps falling
Deborah Gage, Chronicle Staff Writer
Saturday, April 18, 2009
Investments in startups by U.S. venture capitalists dropped dramatically last quarter to their lowest levels since the 1990s, according to two separate surveys released today.
All regions of the country and nearly all industries were affected, from software to Internet to life sciences to clean technology, an area that until now has been considered a good bet.
Dow Jones VentureSource reported a 50 percent drop in dollars invested compared with a year ago, with $3.9 billion going into 477 deals, the lowest level since 1998.
The MoneyTree Report tracked $3 billion invested in 549 deals, down 47 percent from the previous quarter, the lowest level since 1997. MoneyTree combines data from PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters.
Since so few companies are going public or getting acquired, venture capitalists are forced to hold on to the companies they already have, taking resources away from newer startups. Investments in early stage deals are down.
"If you're going to add a company it's got to be really good - it's got to warrant the time," said Steve Harrick, a general partner in Institutional Venture Partners in Menlo Park.
Entrepreneurs, meanwhile, don't like the lower valuations being offered by venture capitalists these days, and many are holding off on raising money, he said.
Despite the steepness of the decline, it still doesn't feel as bad as the dot-com bust, when the problems were caused by the same types of companies that took venture capital, said Noubar Afeyan, CEO of Flagship Ventures.
Still, too much money has been invested in too many clean technology companies, he said, and the investors backing out now are the ones who expected "a short-term pop" from an IPO or a high-visibility acquisition.
The venture industry can't supply enough capital to get clean tech products to market when companies can't go public, he said, so oil companies and utilities will need to step in and partner with startups, as some already have.
Still, two companies did manage to go public recently - one venture-backed - and there are several good companies waiting in the pipeline when the market does improve, Harrick said.
The Bay Area dominated venture investing as it usually does, although investment fell 57 percent from a year ago to $1.14 billion in 139 deals, according to VentureSource.
But dominant regions tend to become more dominant in a downturn, and half of the country's top 10 deals last quarter were in the Bay Area - Anacor Pharmaceuticals; SFJ Pharmaceuticals; Ardian, which makes medical devices; Obopay, which allows bill paying on mobile phones; and Twitter, MoneyTree said.
The most active investor, with 13 deals, was Draper Fisher Jurvetson in Menlo Park, VentureSource said.
E-mail Deborah Gage at dgage@sfchronicle.com.
http://sfgate.com/cgi-bin/article.cg...BU22174C98.DTL
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