Venture investing falls in Q1 to $13.9 bln, VentureSource reports

More evidence of a slowing in the U.S. venture ecosystem appeared Thursday as Dow Jones VentureSource said investments in the first quarter plunged 25 percent.

Venture capitalists invested just $13.9 billion in U.S. deals during the period, down from $18.6 billion in the fourth quarter, VentureSource said. The decline was a significant retreat from the pace of the five previous quarters, when deal-making rose to a quarterly peak of $19.6 billion and averaged well above $18 billion.

Jeff Grabow Ernst & Young
Jeff Grabow, U.S. venture capital leader, Ernst & Young

“We’re at the end of the era of big fundraisings,” said Jeff Grabow, U.S. venture capital leader at Ernst & Young. “I think we’re in the era of execution.”

The number of deals in this year’s first quarter fell a more modest 6 percent to 884, VentureSource said.

The decline in dollars to startups parallels a similar one in the fourth quarter reported by in a separate survey, the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters. Dow Jones found the fourth quarter to have remained fairly steady.

The first quarter decrease was most apparent in late-stage deals, where money going to startups fell by nearly 35 percent to $8.3 billion, according to the latest VentureSource report. Money earmarked for expansion-stage deals fell by a more modest 27 percent. The declines pushed median deal size down to $5.2 million.

Grabow said he has recently observed VCs telling their companies to cut burn rates and proceed on a path to profitability, or at least a positive cash flow.

“Capital is not as available as it once was,” he said.

In the quarter, healthcare deals accounted for 30 percent of the total and information technology deals, 25 percent, VentureSource said.

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