The incredible shrinking venture capital industry

June 5, 2009 | Anthony Ha | Comments |

The venture capital industry is still shrinking, and not just in terms of the amount of money it’s investing or raising — there are fewer firms in the business, according to new data compiled by Dow Jones VentureSource and published in the Wall Street Journal.

In 2008, the number of active firms (those that made at least one investment in the United States) fell 5.6 percent to 868. And that number has been declining steadily since 2000, when there were 1,229 active investors. Earlier this year, the National Venture Capital Association released numbers looking at the problem from a different angle, but finding the same result: In 2008, only 882 firms had raised a fund in the last eight years, down from 1,019 the year before. During that period, the headcount of individual investors (specifically principals who attend board meetings) fell too, from 8,892 to 7,497.

Will the shrinkage continue? It seems likely, especially since we’re not looking at any numbers from 2009 yet. In the meantime, you can check out our list of VC firms that have gone out of business in the last decade.

Next Story: Sony Ericsson goes green on handsets
Previous Story: Rajeev Motwani, Google founders’ professor and early investor, dies

Bookmark and Share

Tags:

Photo of Anthony Ha

About the Author, Anthony Ha

Anthony is VentureBeat's assistant editor, as well as its reporter on enterprise technology, cloud computing, and tech policy. Before joining VentureBeat in 2008, Anthony worked at the Hollister Free Lance, where he won awards from the California Newspaper Publishers Association for breaking news coverage and writing. He attended Stanford University and now lives in San Francisco. Reach him at anthony@venturebeat.com. You can also follow Anthony on Twitter.

  • Anthony i would complete this article by mentionning that smallers funds are blossoming in parallel and not doing too bad (Ycombinator, Techstars, founders fund, brickhouse..) because they are both highly specialized and have a very low burn and lower ROI execptations. i assume this trend will accelerate over time as the industry reshapes
  • That's a good point, though most Y Combinator companies, for example, usually look for more funding down the road.
  • Maybe that's not such a bad thing. I love the VC industry and what it contributes to entrepreneurialim, but a little shake-up might do it some good. What's left will be gold, perhaps -- or new players will help usher in a new era? Reinvention rules the day in the new order introduced by the economic crisis. Given the influence the VC industry has on the emergence of new companies and industries, all the better that it experiences transformation.
  • I will agree and take it one step further. I think this will also make entrepreneurs start businesses the old fashioned way and raise money by selling their products and services, benefits being shorter time to profitability and a greater appreciation for each and every sale.
  • The end of an era.
    Listen/Watch to the "Secret history of Silicon Valley" on youtube.com - that explains a lot.