Venture Funding Up in 2011, But Down in Q4
PricewaterhouseCoopers/National Venture Capital Association released their fourth quarter Money-Tree report on venture capital financing. Dow Jones Venture-Source also released their report on fourth quarter activity and both studies revealed similar results.
Venture capital funding fell in the fourth quarter from the third quarter and from the fourth quarter 2010. Both studies also report that VC activity was up in 2011 over 2010.
Local activity showed the same dip in the fourth quarter. Leaders in the local market were:
- Business-Support Services
- Consumer Information Services
Reasons for the dip according to Greg Beams, Ernst & Young, include:
- Drop in IPO activity resulting in VCs not having fresh funds for investment
- The recession encouraging more companies to strive for positive cash flow earlier in the growth cycle reducing the need for funding
The latter factor, along with an increase in sensitivity to risk in the VC community is probably responsible for the shift of investment to later-stage companies and away from earlier stage companies.