From VentureBeat today:

The first-quarter numbers also were down significantly from the fourth quarter of 2008, when investors committed $2.88 billion to 415 deals, due to the economic turmoil.

More here

The situation is actually worse than the numbers are telling, because VCs mostly invested in ventures that were already in their portfolio, and there were very few new deals done in Q1.

The other interesting piece of data I read recently is this discussion on the VC “math problem” on the Altgate blog:

LPs have been investing capital in VC funds at the clip of about $25 billion per year for the past decade (excluding 1999 and 2000 which were strange years).  But based on a bunch of different estimates of the “exit” market, it would seem to be that only justifies an investment by VC of about $10-15 billion annually… thus the “math problem.”

So if you are hoping things will go back to what it was, think again. And I see it as good news, because a dose of reality is always good even if it hurts. And the reality is that when you are starting a business, you should think about building a machine to generate cash rather than thinking about raising money. And what people call in Silicon Valley “alternative financing” (as in: not VC money) is actually the norm everywhere else. Meanwhile businesses are still being built and there are other ways.

I was in a panel discussion recently on this very topic, and what came out as good a good place to look for money was SBIR grants. All this big organizations that finance research have to allocate 2% of their funds to small businesses. And if you are in high tech, SBIR grants from the National Science Foundation make a lot of sense. It starts with a first round at 100K, and from what was discussed your chances of getting a grant or 1 out of 7, a much better yield than going after VC money. And if you are successful with the first round, the second round can go up to 500K, which is a very decent amount of money. Clearly something worth looking into…



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