The Venture Diet Is Working
The 2009 data on venture capital investments is out now. PWC, along with its partners the NVCA and Thomson Reuters, report that VCs invested $17.7bn in 2009 in the "Money Tree Report."
I think that's a pretty healthy number. I've written in the past that $15bn per year is a good number given the "Venture Capital Math Problem."
My concern is that investing went up in the second half of the year to a $5bn/quarter rate, which is $20bn run rate, a bit above the number that I think is optimal for the industry's returns.
2010 will be an interesting year. If VC investments go back up to $25bn to $30bn per year, then the diet didn't stick and we are back to an overfunded industry that will produce subpar returns on average.
If, on the other hand, the new normal is $15bn to $20bn per year, then the diet worked and we've scaled back the business to healthy levels.
Stay tuned and find out which one it is.