U.S.-based venture capital firms invested $28.3 billion in 2008, eight percent less than in 2007 and the first decrease in total annual investment since 2003. A relatively week fourth quarter of only $5.4 billion, the least active period since the first quarter of 2005, accounted for most of the decline.
Mark Heesen, president of the National Venture Capital Association, says, "Venture capitalists are being cautious with their dollars, which, in this environment, is the right strategy. The stability of seed and early stage deals as a percentage of total deal volume suggests that venture capitalists are continuing to fund very young companies, giving credence to the philosophy that an economic downturn is a time ripe with opportunity.”
Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, says, “Even though we saw a significant drop in funding during the fourth quarter, we still note that the $28 billion invested in 2008 is the fifth highest annual investment total in the 14 years the MoneyTree Report has been tracking venture capital.”
Anthony Romanello of Thomson Venture Economics says, "If you look at long-term returns over the past 10 or 20 years, you see that venture capital provides the best returns."
Thomas Burton, a partner at Mintz Levin Cohn Ferris Glovsky and Popeo, believes, "There just aren't enough quality deals to support the capital that wants to go into the industry."
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