venture capital, anything but a stellar start for 2008

We’ve been writing a lot about startup companies as of late, so it is about time that we take a look at the state of venture capital fundraising and venture-backed exits activity. Today, the National Venture Capital Association (NVCA) released their report for the first quarter of 2008.  In short, the findings show that Q1 of 2008 saw a 31% decrease in fundraising as compared to the same period in 2007. A possible reason for the slowdown might be that many of the top firms raised significant capital over the last few years. Particular low for the first quarter was the number of new funds as compared to follow-on funds, yielding a follow-on to new fund ratio close to 10, whereas Q1 2007 came in at about 3. The NVCA also reported a gloomy picture with respect to venture-backed exits for the first quarter of 2008 earlier this month, with IPOs at the lowest volume level since 2003, and acquisitions at the lowest level in about a decade. The Life Sciences sector dominated the IPO activity with four exits, while information technology came in a distant second with only one. Needless to say, no semiconductor IPO exits occurred during this period. The merger and acquisition side of things saw a total of 56 deals, with computer software and internet specific deals accounting for close to half of these. There were four deals listed in the semiconductor/other electronics category, however the actual companies were not disclosed. As expected, the lackluster start to the year is blamed on the uncertain economic climate in the U.S. Overall, these results so far mostly agree with the NVCA predictions for 2008 which we discussed here.