U.S. Venture Capital Recovery Stalls as 3Q Investment Slumps; Trends Point to a Prolonged Correction, Shakeout
17 Octobre 2009 - 6:01AM
PR Newswire (US)
Dow Jones VentureSource: Venture Capital Investment Down 6% From
Previous Quarter; IT Outpaces Health Care, But Only Slightly;
Investors Favor Later Stage Deals Following an uptick in the second
quarter, investments in U.S. venture-backed companies have stalled
in the third quarter, putting 2009 on track to be the worst
investment year since 2003, according to new data from industry
tracker Dow Jones VentureSource. Venture capitalists invested $5.1
billion in 616 deals in the third quarter of 2009, down 6% from the
$5.4 billion put into 595 deals during the second quarter of this
year. This quarter's total is down 38% from the $8.2 billion
invested in 663 deals during the third quarter of 2008. "The slow
recovery we've seen for venture capital has faltered," said Jessica
Canning, director of global research for Dow Jones VentureSource.
"As liquidity and fundraising lag after the economic meltdown in
2008, investors have no choice but to keep a tight rein on
investments until the industry is on more solid ground." Scott
Austin, editor of Dow Jones VentureWire said: "The current
investment pace will likely persist right through 2010, as long as
limited partners -- the pension funds, university endowments and
other suppliers of capital to venture firms -- continue to scale
back their commitment levels to venture funds. With fewer dollars
to put to work, venture firms will only invest in the most
promising and capital-efficient companies going forward." IT Takes
Back Reins From Health Care Information Technology (IT) is back on
top after Health Care outpaced the sector for the first time on
record in the second quarter of 2009. IT companies raised $1.9
billion in 270 deals during the third quarter of 2009 while Health
Care saw $1.7 billion invested in 184 deals. "For the first time,
Web 2.0 investments surpassed the software sector," said Ms.
Canning. "Although the IT recovery has been sluggish, this
quarter's investments in the Web-heavy information services sector
are nearly double the investments made in the first quarter of this
year." According to VentureSource, the U.S. software sector saw
$581 million invested in 106 deals during the third quarter, a 55%
decline from the $1.3 billion invested in 143 deals during the same
period last year. This is the sector's lowest quarterly investment
total since 1996. The information services sector, which includes
most of today's Web 2.0 companies, saw investment of $627 million
in 86 deals, a 11% increase from the $567 million invested in 74
deals in the third quarter of 2008. Medical Device Investments
Nearly Match Biopharmaceuticals While Health Care came in a close
second to IT, investment in the industry is down 25% over the same
period last year. "Surprisingly, health care investment dropped
significantly this quarter," said Ms. Canning. "After several years
of growth, 2009 could end with the lowest amount invested in this
space since 2000." The number of biopharmaceutical deals rose, but
investment dropped 32% from last year. In the third quarter,
investment in biopharmaceutical companies totaled $811 million
across 83 deals, down from $1.2 billion raised through 73 deals
last year. Investments in the medical devices sector were close
behind. In the most recent quarter, venture capitalists invested
$774 million in 77 deals, down 3% from $796 million raised in 63
deals in the third quarter last year. Energy Investment Plummets
From Year Ago, But Up Over 2Q The Energy & Utilities industry
raised just $415 million in 23 deals during the third quarter, down
70% from the $1.4 billion invested in 34 deals during the same
period last year. Investments in the third quarter were up over the
previous quarter which saw $310 million invested in 27 deals in the
sector. Investment in the renewable energy sector fell
substantially as 14 deals raised $343 million, 73% less than the
$1.3 billion invested in 23 deals during the same quarter last
year. Elsewhere, the Business and Financial Services industry
attracted $560 million in 81 deals, down 32% from the $821 million
invested in 91 deals during the third quarter last year. The
Consumer Goods industry had a strong quarter with $207 million put
into 14 deals, a slight increase from the $202 million invested in
15 deals last year. The Consumer Services industry saw $125 million
invested in 20 deals, a 35% drop from the $192 million put into 24
deals last year. The Industrial Goods & Materials industry
garnered $169 million in 17 deals, a 27% decrease from the $231
million put to work in 25 deals last year. Corporations Invest
Instead of Acquire Corporations may be making fewer acquisitions,
but they're stepping up their investing. During the third quarter,
venture-backed companies raised 11 corporate rounds garnering $178
million, a 16% increase over the $153 million raised in the same
number of rounds last year. This brings the year-to-date total to
$650 million, well above the $541 million raised in 2008. VCs Favor
Later Stage Deals, Deal Sizes Shrink In the most recent quarter,
later stage companies accounted for 40% of deals while first-round
deals accounted for 27% of the total deal count. During the same
period last year, later stage companies accounted for 33% of deals
while first-round deals accounted for 35% of the total deal count.
By investment, later stage deals garnered 59% of venture dollars in
the third quarter of 2009, up from 52% last year. The proportion of
the quarter's investment total going to seed and first rounds was
16%, down from 18% last year. The proportion going to second rounds
dropped to 22% from 27%. Recapitalizations accounted for roughly 3%
of investments in the third quarter of 2009, on par with last year.
The data also shows that median deal size fell to $5 million in the
third quarter from the $7 million median seen a year ago. The $5
million median is consistent with the previous two quarters and is
the lowest median deal size since 1999. Regional Perspectives As
usual, California dominated venture capital activity in the third
quarter, representing 41% of the nation's deal flow and 54% of the
capital invested. By major region, the VentureSource data showed
that: -- Investment in the San Francisco Bay Area fell 33% compared
to the third quarter of 2008 with $2.2 billion with 183 deals
completed. -- Texas garnered $192 million in venture capital with
29 deals done, up 44% from a year ago. -- New England garnered $526
million in 76 deals, a 37% decline from investment in the region
during the third quarter of 2008. -- Venture capitalists invested
48% less capital in Southern California during the third quarter
with $458 million put into 66 deals. -- The New York Metro region
attracted $268 million in 56 deals, down 51% from a year ago. --
Investors put just $100 million into 16 deals in Colorado during
the third quarter, after investing a record $300 million in the
previous quarter. -- Investment in Washington dropped 47% from one
year ago to $148 million with 18 deals completed. -- With seven
venture deals, North Carolina's Research Triangle received $56
million in venture financing in the third quarter, 35% less than
during the same period last year. -- The Potomac region attracted
39% less capital in the third quarter with $175 million going into
27 deals. About Dow Jones VentureSource's Research Methodology The
investment figures included in this release were collected by
surveying professional venture capital firms, through in-depth
interviews with portfolio company CEOs and CFOs, and from a number
of secondary sources. These statistics represent equity investments
into early-stage, innovative companies only and do not include
companies receiving funding solely from corporate, individual,
and/or government investors, or from buyout or other non-VC
investment firms. For deeper analysis, download the complete report
from Dow Jones VentureSource at
http://fis.dowjones.com/VS/3QUSFinancing.html. You can also follow
the story at http://www.twitter.com/djventurewire. For general
information about VentureSource, visit
http://venturecapital.dowjones.com/. No statement herein is to be
construed as a recommendation to buy or sell securities or to
provide investment advice. Copyright © 2009, Dow Jones
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