VC in Q3

VCs say that downturns provide the best investment opportunities. Valuations are down and more companies need capital, so in theory, this combination should result in more deals and more dollars invested. What does the data say?

MoneyTree recently published a series of charts illustrating industry trends. According to MoneyTree, venture capital firms invested $4.8 billion in Q3, greater than the $4.1 billion in Q2 and $3.3 billion in Q1.

The total number of deals decreased to 637 (down from 657 in Q2), but the average deal size rose to $7.6 million, the highest number in 2 years.

For software investors, though, 2009 continues to be anemic. Venture capital firms made only 128 software investments in Q3, deploying a total of $622 million, both record lows for the last decade! At least OpenView is doing its part. Our August investment in Balihoo contributed about 1% of the total VC dollars invested in software in Q3.