Last week we wrote about VC confidence in the valley, and now we have the other side of the story: the numbers. Venture capital funding fell almost 40 percent in Q1 2009 compared to 2008’s first quarter, according to figures published by the National Venture Capital Association (NVCA). Only $4.3 billion was raised in Q1, by 40 venture capital funds, the lowest number of funds in over five years. Almost twice as many venture capital funds were raised in Q1 a year ago, totaling $7.1 billion. The most staggering difference in Q1 2009 venture capital is that, unlike in past quarters, new funding was almost non-existent. VC firms contributed to 37 follow-on funds, but only three new ones, “a ratio of over 12-to-1 of follow-on to new funds, compared to 6-to-1 in the first quarter of 2008,” according to the


Since 2004, the average ratio is around 3-to-1.

The good news is that there was a slight uptick in funding from Q4 2008, which raised only $3.5 billion.

According to Mark Heesen, president of the NVCA, there are two trends at work in venture capital funding:

“First, the majority of venture firms are not actively fundraising at this time because they have either recently raised a fund and are investing those dollars or are waiting until market conditions improve.

“Second, despite the recession, venture firms with solid track records continue to be able to secure sizable commitments from limited partners as there remains a great deal of promise for future returns from the venture capital asset class.”

The full report is available as a downloadable PDF at NVCA's homepage.

By Mark Alvarez