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Venture Capital Takes Hit in Third Quarter

Kim Hart

Half of U.S. venture capital firms believe the current financial crisis is worse than the tech bubble crash of 2000.

That's according to the newly released DLA Piper survey of technology and venture capital executives. The survey also found that 66 percent of technology companies are reducing revenue forecasts. And more than half of the respondents believe the stagnant IPO market will not begin to rebound until at least 2010.

A report released by the National Venture Capital Association and PriceWaterhouseCoopers shows a drop in venture capital deals during the third quarter.

Venture capital investment fell 7 percent to $7.1 billion in the third quarter, compared with $7.7 billion during the second quarter, according to data from Thomson Reuters. During the third quarter, 907 deals were closed, compared to 1,033 deals for the second quarter of the year.

During the third quarter of 2007, $7.8 billion in venture capital was invested in 983 deals.

The amount of financing going to early-stage start-ups raising their first rounds of funding dropped to its lowest level since 2004.

But in the Washington D.C. and Baltimore areas, early stage deals were more common. Nineteen early stage deals were completed, compared to 12 expansion deals and 13 later stage deals. Of the region's $180.6 million total financings, 23 percent were made up of early investments.

Biotech and software deals drove investments during the quarter, and energy companies, including clean tech, were the third most-popular industry. Nationally, the
two largest deals during the quarter -- a $140 million and another $104 million investment -- were made in solar companies.

New figures from Dow Jones VentureSource show D.C.-area companies raised $264.4 million in venture capital during the third quarter, which was about 27 percent -- or nearly $100 million -- less than the same period in 2007.

By Kim Hart  |  October 20, 2008; 4:50 PM ET  | Category:  Kim Hart
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