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At The Startup Garage, we’ve been spending a lot of time paying attention to the economy as it relates to startups, especially in relation to funding. In the past few days, a variety of reports have been released regarding the state of venture capitalism over the past quarter. Based on what we have seen, VCs and Angels are handing startups less money as of late. Here are a couple of reports that show this in more detail.
Money Trees Quarterly Venture Capital Report
Every quarter Price Waterhouse Coopers comes out with a quarterly report about the state of venture capitalism in America, and this quarter was no exception. According to the report, the total amount VCs invested dropped by 31% from the previous quarter and the number of deals that were made also fell by about 19%. Thats a decrease of $2.1 billion and 182 deals. Software, Biotechnology, Clean Technology, and Internet Specific companies rounded out the top 4 industries that received money this past quarter, but all saw a significant decrease in funding. The one bright spot of the PWC report is that the large portion of the deals, 35%, occurred in the Early stage.
Super Angels Not So Super?
According to blogger Gregory T. Haung and a report coming from the Center for Venture Research at The University of New Hampshire, angel investments for the first half of 2010 totaled $8.5 billion which is a 6.5% decrease compared to 2009. Angels did increase the total number of deals that they made by 3%, up to 25,200. However, the statistic that troubles us the most is that only 26% of all the deals that were made were classified as seed or startup stage.
So what do these reports mean for the average entrepreneur? Basically, that VC and angel funding is decreasing. There are several factors that contribute to this decline. Over the past few months Internet companies have been able to lower their startup costs, which could explain some of the decrease in funding. Also, as has been the trend over the past couple of years, the unfavorable economic climate is making investors pickier about where they put their dollars. Even though this is a negative trend for entrepreneurs, keep in mind that there are still plenty of sources of funding out there.