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VC Dollars, Deals on the Decline

Posted by: Mark Marich on October 22, 2012 Source: Policy Dialogue on Entrepreneurship

While a report we profiled last week talked about signs of recovery across the board for angel investors, the outlook apparently isn’t so bright for the venture capital industry. The latest survey from PricewaterhouseCoopers and the National Venture Capital Association shows that VC investments declined during the third quarter of 2012—both in terms of dollars and deal volume.

Compared to last quarter, dollars invested dropped from $7.3 billion to $6.5 billion (11 percent) while the number of deals dropped from 935 to 890 (5 percent). The running totals for 2012 don’t look any better -- $20 billion into 2,661 deals – dropping 32 percent in each category from the same time in 2011. The new figures are the lowest Q3 totals over the past five years.

Investments into early and seed stage deals took the biggest hits. Seed stage investments dropped 22 percent in dollars, but only 7 percent in number of deals. Meanwhile, early stage investments took a similar hit—21 percent in dollars, and 7 percent in deals.

So where do the dwindling dollars go? Despite a recent study that showed high-growth firms are popping up all over the country, VC investments are going pretty much right where you would expect.

Those in the software industry took the lions’ share of funding with $2.1 billion invested into 304 deals during the quarter—nearly doubling the dollars invested in biotechnology, the next most heavily invested industry.

In terms of geography, 58 percent of the funding went to investments in three states--California, Massachusetts and New York.

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