PwC: VENTURE CAPITAL INVESTMENTS DECLINE

By Rob Starr, Content Manager, Big4.com

According to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters,  investment for the first three quarters of the year was $20 billion into 2,661 deals, a level well below this point last year, making it likely that 2012 will fall short of 2011 in terms of both dollars and deal volume.

The Software industry received the highest level of funding for all industries with $2.1 billion invested into 304 deals during Q3, marking the fourth quarter in the last five in which investment in Software exceeded two billion dollars.  This level of investment represents a 12 percent decline in dollars and a one percent increase in deal volume from the second quarter when $2.4 billion was invested in 300 deals.

Internet-specific investing fell 12 percent in dollars and eight percent in deals from the previous quarter with $1.7 billion going into 250 deals but remained well above the billion dollars per quarter level that has been prevalent for the last two years.  Additionally six of the top 10 deals for the quarter were in the Internet-specific category.  ‘Internet-specific’ is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category.

Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC US commented:

“The decline in funding for Seed/Early stage companies is firmly in place – we’ve seen a drop in dollars and deals both quarter-over-quarter and year-over-year,”she said.  “We’re seeing fewer new venture funds being raised which means less capital is available for new investments.  And, we’re seeing venture capitalists be very cautious with the capital that is available due to the lack of a significant number of liquidity events.  Instead, venture capitalists are continuing to support the companies already in their portfolio.”