Venture capital cash keeps flowing
Despite the economic slump, VC investments were flat in the second quarter, and have stayed steady since the start of 2007.
(Fortune Small Business) -- The economy may be slumping, but the venture capitalists are still spending.
Venture capital investment activity in the second quarter of 2008 was flat compared to the first quarter, according to a recent study by PricewaterhouseCoopers and the National Venture Capital Association (NVCA). Despite the downturn, total investment dollars have stayed relatively steady since the first quarter of 2007 - and since 2002, the overall trend is upward for both investment totals and the number of deals made.
The steady spending comes despite an IPO market that has all but disappeared.
"VCs realize that the global economy today is not going to be the global economy of the future, and they will continue to invest in the companies that will define the economy in five or 10 years," said Mark Heesen, president of the NVCA. "There will be bumps of course, but overall, we're very optimistic that investments will stay steady even as the economy takes a downturn."
Venture capitalists invested a total of $7.4 billion in 990 deals during the second quarter (ended June 30), with $1.6 billion going into first-time financings. The clean-tech sector reached an all-time quarterly high in investment dollars, with $883.6 million going into 65 deals.
The activity thus far indicates that total 2008 investments will be on par with the $30.7 billion venture capitalists invested in 2007.
The study also found that international investing is on the rise. U.S.-based venture capitalists put $583 million into 47 deals in China in the second quarter, nearly doubling the first quarter's total investment in the country. Additionally, $473 million went to deals in India, a 27% boost over the first quarter.
"There are a lot of opportunities in clean tech, energy, life sciences and Web-services companies in India and China," said Jennifer Fonstad, managing director at venture-capital firm Draper Fisher Jurvetson. "This won't slow down as the countries expand their health-care and green-tech initiatives."
"The U.S. and Europe are already mature markets," Heesen said. "But there's a whole new rising middle class in China and India. Consumers there are willing to try new things, so investors realize that entering those countries at the ground level will make them money." 
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