The Wall Street Journal today has a bunch of stats related to investment by venture firms
over the last several months. A quick summary: In Q1 2009, VCs invested only half as
much as a year ago — still close to $4 billion but the lowest amount since 1998. The
number of deals closed was down sharply, even as the average investment fell from $11
million to $8 million. The Journal gives two reasons for the declines: first, the sources of the
capital invested by VCs (pension funds, private investors, etc.) saw the value of their
investments decline, so there is simply less money available. Too, the recession is making
everyone more cautious, including VCs.
Engineering software is generally conceived by techies who build and grow a business
using their own resources. But to grow beyond a certain size, outside investment is needed.
The industry could be hurt for years if the companies on the cusp of "big" can’t find
investors; the "next big thing" we all eagerly anticipate could wither and die now without
outside capital. The scary thing about this recession is that we will ultimately make it
through, but for how long will we suffer the after-effects?