Venture capital investments plunged in 4Q08

Venture capital investments plunged 33% in the fourth quarter, falling to the lowest level in nearly four years as the financiers of new business ideas became more reluctant to take on new risks during a recession that has shown no signs of easing.

Deepening a retrenchment that began last summer, venture capital investments in the U.S. totaled $5.4 billion during the final three months of 2008, according to a report released by PriceWaterhouseCoopers, the National Venture Capital Association and Thomson Reuters (all New York). This compares to the $8.1 billion invested in the same period in 2007 and is the lowest quarterly level of venture investments since the first three months of 2005.

Besides investing less overall, the economic meltdown also means venture capitalists are spending less money on new companies and instead focusing on those already in their portfolios. Companies seeking their first round of financing raised $1.1 billion in the fourth quarter, a 48% drop from $2.1 billion in the last quarter of 2007. This is also the smallest amount put toward new companies since the first three months of 2004.

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