The number of first-time VC investments in Q2 2009 was the lowest since 1994, according to the MoneyTree Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. While that’s a scary statistic, overall VC funding was healthier than in the first quarter, growing 15 percent in terms of revenue over Q1. $3.7 billion was invested in the second quarter, compared to $3.2 billion in the first. Year over year, funding is down $7.6 billion. Based on total earnings thus far, the report projects the VC industry having its worst year since 1997.
"Halfway through 2009 we are seeing more positive signs than at the beginning of the year, including an overall increase in investment levels and an ongoing interest in seed and early stage funding,” said Mark Heesen, president of NVCA.
“However, until we see notable upticks in venture fundraising and exit activity – which drive investment levels – we won’t expect considerable increases in the number of deals completed each quarter,” Heesen said.
Investments in Life Sciences (biotech and medical devices combined) represented 41 percent of money invested in Q2. The sector raised $1.5 billion during the quarter, an increase of 47 percent over Q1. Biotech funding was the highest of any industry, raising a total of $888 million. Following biotech were software ($644 million) and medical devices ($628 million).
The hardest-hit sector was Media and Entertainment, whose funding declined 48 percent, and internet-specific companies (“a company with a business model that is fundamentally dependent on the Internet”), whose investment revenue fell 15 percent.