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VC Funding Edges Up, First-Time Fundings Remain Low

Posted by: John Tozzi on July 21, 2009

Venture capital investment ticked up slightly in the second quarter to $3.7 billion invested in 612 deals, up from $3.2 billion in 603 deals in the first quarter, according to the MoneyTree Report released today by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters.

Only 141 of those deals were first-time investments. “You have to go back to 1994 to see this few number of first time fundings,” says the NVCA’s John Taylor. While the venture industry normally funds 1,000 new companies a year, or as many as 1,300 in recent years, this year VCs are on pace to take on just 580 new entrepreneurs, Taylor says.

One reason is that venture firms have to commit more money to firms they’ve funded in the past, because despite a handful of IPOs this year, the market is dismal for taking companies public or selling them to larger firms.

It’s still not clear whether the current levels of funding represent a temporary dip or a long-term drop in VC funding. You often hear the cliche from VCs that there’s still money out there for entrepreneurs with good ideas, but clearly there’s less money now than there was a year ago.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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