07/01/09 Even with the stock rebound, the second quarter was the worst quarter for U.S. venture capital investment since 2003. Overall venture-backed investment fell 57% from the second quarter of 2008, says Dow Jones’ VentureSource today. That’s roughly $3.6 billion worth of VC out of the market.
“Venture capital investment has all but dried up,” writes our tech adviser Patrick Cox. “There are two primary causes. One is purely psychological. In a steep downturn like this, investors who should know better get nervous and hold capital. The other, which will be longer lasting, is the ‘crowding out’ effect. With government debt at record highs, capital is being sucked up by the Fed to finance its borrowing.
“This, ironically, presents an enormous opportunity for the VC players who are still investing. With so little VC money on the table, those who are willing to make deals are making great deals. This is exactly the time to be in the VC business.”
But the venture capital market in Brazil is alive and kicking. VC investment has more than quadrupled there since 2004, says the Brazilian Association for Private Equity & Venture Capital today. The market was a measly $6 billion then. VC investment totaled $28 billion in 2008.
Ian Mathias
Ian Mathias is the managing editor of Agora Financial’s Income Franchise, where he writes and researches about retirement, dividend and fixed income investing. Much of his work is featured in The Daily Reckoning and Lifetime Income Report – Agora Financial’s flagship income investing advisory.
Previously, Ian managed The 5 Min. Forecast, a fun, fast-paced daily look into the future of global markets and macroeconomics. He’s also worked in public relations, where media outlets like Forbes, AP, Yahoo! and MSN Money have syndicated his writing. If he’s not at work, you’ll probably find Ian on a bicycle, racing up and down the “mountains” of Baltimore County. Ian has a BA from Loyola University in Maryland.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
I don’t read about any deals being done either in the US or abroad.
To-the-point post. Here are couple thoughts. Venture funds seem to feel disoriented in the current economy. What excites me is that positive trends are emerging for the US private equity industry in comparison to last 2 years, supported by improved valuations and conditions in the capital markets. The PE industry has not been immune to the affects of the struggling economy, as 2009 results demonstrated, but performance in the beginning of 2011 has been positive. Opportunities abound in the current environment offering ample PE investors capital to deploy, and evidence that some of the best performing PE vintage returns, in the past, were made near the bottom of the cycle.