Venture capital investment into start-ups dropped to its lowest level since 1997 in the U.S., with clean technology hit the worst, new figures showed on Friday.
Two separate surveys showed venture capitalists backed away from putting money into new companies. Instead, they are nursing their existing companies through a tough period.
The first quarter saw double digit declines in every major industry sector, marking the lowest levels for U.S. venture investment since 1997, said Matthew Toole, director of research for Thomson Reuters' Investment Banking content, in a conference call on The MoneyTree report.
The report, issued by the National Venture Capital Association and PriceWaterhouseCoopers, showed investment sliced nearly in half -- to $3.0 billion in the first quarter of this year compared to $5.7 billion in the previous quarter.
DowJones VentureSource used slightly different methodology but came to the same conclusions, finding a nearly 50 percent cut in the first quarter in 2009 compared to one year earlier.
The health care sector came off the best, dropping to its lowest levels of new investment since 2003, at $1.35 billion for 118 deals, Dow found.
By contrast, the renewable energy sector, known as clean tech, declined 73 percent to $117 million in nine deals, compared to one year earlier, Dow found.
The reports found investors preferred to put money into existing ventures rather than start new ones.
The question is what to do in this uncertain exit environment, said Noubar Afeyan of Flagship Ventures, an early stage venture capital firm in Cambridge, Mass. An exit would be a sale of start-ups to a large company, or an initial public offering.
What we are doing is focusing on our current portfolios, he said in the MoneyTree conference call. Only by focusing on their existing companies can venture capitalists be sure of making it through a difficult period that has no clear end in sight, he said.
(Reporting by David Lawsky; Editing Bernard Orr)