Interesting link today in PE Hub on the drop off in venture capital funding in Q4 2008. The post attempting to prove that well known funds like KP and Sequoia have slowed done their investment pace in Q4. I would think it’s pretty obvious all VCs backed down in Q4 - just like everyone else, VCs were reeling from the tempest in the financial markets and trying to understand how that would affect their portfolio companies and favorite industry spaces. I think more interesting are the spreadsheets linked at the bottom of the page. If I’m parsing the data correctly, then Q4 venture capital investments were off pretty substantially, both in terms of number of companies backed and total dollars invested.
- Q4 2007: $8.085 billion invested in 1,051 companies.
- Q4 2008: $5.403 billion invested in 818 companies.
Drop from Q4 2007 to Q4 2008 was approximately 40% for both metrics. That’s a big drop, although not as big as the 60%+ drop from 2000 to 2001. (full year and Q4 drop were both just over 60%)
Here is the breakdown by stage (I’ve considered startup/seed + early as “Early stage” and expansion + later stage as “Later stage.”)
- Q4 2007: Early stage: $2.012 billion invested in 387 companies.
- Q4 2008: Early stage: $1.564 billion invested in 326 companies.
- Q4 2007: Late stage: $6.073 billion invested in 664 companies.
- Q4 2008: Late stage: $3.839 billion invested in 492 companies.
Drop from Q4 2007 to Q4 2008 for early stage was -22% in $ and - 16% in # of companies invested in.
Drop over the same time period for late stage was -37% and -26%, respectively.
Yikes.
It’s getting hard to raise new capital, and even harder to raise follow on capital? I think that makes sense if you consider my previous post on VC funds cutting off lower ranking portfolio companies from the follow on financing teat more quickly.
*Note: I got all of this data from the “National data spreadsheets, including sector-by-sector investing” spreadsheet at the bottom of the PE Hub post - I hope I’m using the best data.
