Venture-capital investments down, report says

By Thomas Heath
Washington Post Staff Writer
Tuesday, October 20, 2009

Venture-capital funds are on track this year to invest between $15 billion and $20 billion in new companies compared with about $30 billion in each of the last two years, according to a report released by the National Venture Capital Association and PricewaterhouseCoopers accounting firm.

The declining investments mean fewer companies are likely to receive funds. During the first three quarters of 2009, the report counted 1,900 deals compared with more than 3,000 for the same period a year ago. "The industry is trying to find a new size going forward," said John S. Taylor, vice president of research at Arlington-based NVCA.

The financial crisis and recession have buffeted the industry, making it difficult to raise money from investors. Taylor said the industry also is finding fewer deals worth investing in and fewer potential buyers for companies when the venture capital firms want to exit.

"There just weren't good companies and good exits available for all the businesses that received funding during the bubble," Taylor said.

Washington region start-ups captured more than $150 million in investments from U.S. venture capital firms in the third quarter, according to the report. IBiquity Digital, a Columbia-based media and entertainment company, received $21 million last quarter, while Sleep Solutions, a Glen Burnie-based medical device firm, received $20 million.

The Carlyle Group, the District-based private-equity giant, invested $20 million and $10 million in two energy deals last quarter. Columbia Capital, New Enterprise Associates, Novak Biddle Venture Partners, all venture-capital firms in the Washington area, were part of a group that invested $14 million last quarter in Approva Corp., a Reston-based software company.

Deals nationally could slow after a separate survey by Thomson Reuters and the NVCA failed to find a single firm that raised new money in the third quarter.

That doesn't mean there is no money sitting on the sidelines. New Enterprise Associates has raised the first $2.46 billion of a new $2.5 billion fund, according to a filing with the Securities and Exchange Commission.

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