Was the end of 2009 the end of the start of the upswing, or the beginning of the end of it? New figures released that track fourth quarter venture capital spending make for interesting reading on this matter. Except if you're in cleantech.
The data is coming from New York-based research firm ChubbyBrain, and it concerns venture capital funding rounds in Q4 2009. The figures are complex, but there are some fascinating facts buried among them. For a start, the absolute amount of cash concerned fell quarter on quarter between Q3 and Q4 from $6.1 billion to $5.5 billion--but the Q3 figures were artificially boosted by a number of big late-stage investments that came to conclusion at the time, like Twitter's $100m deal.
The most promising sign is that the actual number of deals ChubbyBrain tracks rose throughout the year, and peaked in Q4 at 687, a full 84 more than in the same period in 2008. That's an extremely positive sign, indicating that venture capitalists are happy to speculate on companies--and in particular early stage investment deals were on the rise, at 37% in the quarter compared to 29% in Q3. ChubbyBrain is talking this as a sign of increased investor optimism, and that translates into a definite thumbs-up for an economic upswing.
But the distribution of the spending across industry sectors tells a very surprising story: Despite strong media attention and rising public awareness of environmental issues, cleantech did particularly badly in the VC investments--funding dropped 38% over the quarter. Instead VC firms were looking for safer, less capital intensive investments and seem to have settled on an old faithful--Internet startups. Spending in this sector rose 40% over the figures for Q3.
Is this a sign of another dotcom boom? Not quite--we'd need to see this behavior replicated for several quarters to believe that. But it is a sign that Net startups are now a mature business sector that is a safe target for investment, and that might be an indicator that Web companies will be one significant factor in the upswing. Cleantech businesses aren't failing, of course (before you start worrying about environmental disaster), it's just that they're harder to scale...and though they're vital for eco causes they might not be a useful financial device to help turn the economy around.
[Data Source: Chubby Brain]