According to the latest report from the National Venture Capital Association, venture capital investments were down 8.5% during the first quarter of 2008 when compared to the last quarter of 2007. The report also found that deal flow was also down.
The decrease in new deals landing on the desk of VCs and the fewer deals being funded are both consistent with the slowdown in the economy.
"Despite the current economic downturn in the United States, venture capitalists are still putting money to work across multiple industries and stages of development," said Mark Heesen, president of the NVCA. "The continued interest in the life sciences and clean technology industries, as well as the traditional IT sectors, reflects the long term investment horizon that the venture industry has always embraced. We do not expect to see significant declines in investment levels in the coming year. However, the dollars going to later stage investments could increase if the IPO window remains closed for an extended period of time and venture capitalists have to sustain companies longer than expected."
This part of the report actually concerns me more than the slowing flow of deals. VCs had already become more cautious in 2007, pursuing more later stage deals. With angels also pursing their investments into later stage deals, there is an alarming shortage of money for seed and early stage ventures.
The drag on these shifts might be felt on the economy for years to come.
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