San Francisco/New York/London: US venture capital, or VC, investments fell 61% to $3 billion, or Rs15,000 crore, in the January-March quarter, the lowest level in 12 years, as the financial crisis chased away funding for technology and clean-energy deals.
Funding of clean technology—coming off a surge of investments in 2007 and 2008—plunged 87%, according to the National Venture Capital Association (NVCA). Total venture investments dropped 47% from the previous quarter.
The freeze in initial public offerings (IPOs) kept start-ups from getting funding because investors weren’t sure how they would earn a return, said John Taylor, vice-president of research at NVCA.
“We are in a very difficult, stressed time,” Taylor said on a conference call last week. “Everyone is trying to figure out what is going on.”
The IPO market showed signs of thawing this week, with two firms going public. Bridgepoint Education Inc., a provider of college courses, and language-software maker Rosetta Stone Inc. debuting trades on 15 and 16 April, respectively.
Still, the deals may not open the floodgates, said Stephen Harrick, general partner at Institutional Venture Partners, a backer of Twitter Inc. “We’ve companies we think are ready or could be ready, but there hasn’t been any interest from the markets.”
The average size of a VC investment fell to $5.5 million from $7.8 million a year ago, NVCA said.
The British Private Equity and Venture Capital Association last week reported spending by private equity firms dropped to a three-year low in 2008. Firms spent £19.5 billion, or Rs1.43 trillion, compared with £31.6 billion the previous year, the group said, citing data from PricewaterhouseCoopers.