Venture Capital Starting to Cool Off

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It looks like startups and companies seeking seed money and additional rounds of funding will have to look a little harder this year and into next. PricewaterhouseCoopers and the National Venture Capital Association released a report that states quarterly venture-capital investment was down 7 percent.

" ... We do expect to see a dip in investing over the next several quarters," states Tracy T. Lefteroff, global managing partner of venture capital at PricewaterhouseCoopers.

The good news, she says, is that "we ... do not expect venture funding to dry up. Venture capitalists have slugged through difficult times before and this one should be no different. They are long-term investors and won't jump ship just because the times are tough."

"They may tighten their belts" though, Lefteroff states.

The same MoneyTree-branded report notes that, while funding was off, there was still $7.1 billion pumped into 907 deals during the third quarter of 2008--an amount that's not too far from normal.

Still, the third-quarter numbers don't reflect the dark October experienced on Wall Street and Main Street, and venture investment could continue to slide. "We will be watching the mix of first-time vs. follow-on rounds closely in the coming months for any notable decline," says Mark Heesen, president of the National Venture Capital Association.

He thinks the clean-tech sector "will continue to grow despite economic woes, and could become the top investment sector for the venture capital industry by 2012."

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