Venture capitalists see money dry up in first quarter, but does it mean a drought?
In the first quarter of 2007, 83 venture capital firms raised about $6.3 billion. During this year's first quarter, that number dropped to 57 firms, a 32 percent plunge. The actual amount of capital invested remained flat year-over-year, reports Bits. A National Venture Capital Association flack insists the news doesn't mean venture capital is suffering from an economic downturn.
"VC fund raising is very cyclical," said Emily Mendell. "A lot of firms have gone out in the last two or three years and fewer firms in the fund raising mode — that's why there aren't that many new funds." Put another way, VC firms would be foolish to go out hat in hand seeking money now. Their customers, largely pension funds and other large institutions, have other worries right now. And there's not much for VCs to brag about in their sales pitches: Only five venture-backed companies went public last quarter, and in those three months, only 56 companies were acquired, compared to 83 in the fourth quarter.