2009 VC Investment Data: Silver Linings In A Dark Cloud

Venture capitalists invested $17.7 billion into 2,795 deals for U.S.-based companies in 2009, according to data released today by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters (publisher of peHUB). That’s a 37% dollar decrease and 30% deal decrease from 2008, and represents the lowest volumes since 1997.

It actually gets a bit worse. All but one industry sector experienced double-digit dollar declines (including some particularly sluggish stats for cleantech). And the one exception — chips and networking — still dropped by five percent.

So why my headline optimism? Three reasons:

1. Low investment totals might concern entrepreneurs and fee-driven investors, but they don’t correlate to low investment returns. Far more venture capital was invested in 2001 or 2003 than in 1997, but which year’s median returns would you prefer?

2. Yesterday, Larry did a post about how Kleiner Perkins did 14 deals in December, compared to a monthly average of just six deals. A bunch of folks tweeted that the bump was not evidence of a real VC investment upturn, since many of the deals were follow-on investments. I don’t think the distinction is as important as do others — there is no path to exit without follow-ons, and they’ve become anything but gimmes of late — but here’s a nugget for those who disagree: Seed-stage investments were the only “stage” to rise in 2009, increasing by two percent.

3. Investment totals increased in both Q3 and Q4, suggesting that the first-half chill began to thaw as public equity market conditions improved. MoneyTree reports that venture capitalists invested around $5 billion into 794 deals in Q4, compared to $5.1 billion into 689 deals in Q3.

If that line made sense to you, read it again. Okay, let me explain.

MoneyTree opted not to include a $180 million round raised in December by social gaming company Zynga. Something about how Zynga had previously raised small “acquisition financing” rounds. It’s absurd, and I told the number-crunchers about it a few weeks back. They paid little attention at the time, but I’d bet $180 million that the round will be included when MoneyTree updates its numbers next quarters.

Point is, inclusion of the Zynga dollars would mean that the VC dollar total in Q4 was higher than in Q3. And since Zynga should have been included, the VC dollar total in Q4 was higher than in Q3.

Here’s copy of the MoneyTree press release, and here’s a detailed data spreadsheet. You also can download regional data, the year’s top deals (Zynga excluded, natch), and Q4’s top deals.

Finally, I discussed the numbers for my weekly Reuters video spot. Get it here.