It’s well know that VC funds take their economic hits with a delay because they work in liquid money, but it seems like their time of reckoning for the great bust of ’08 has finally come. VentureBeat reports that new data from the National Venture Capital Association and Thomson Reuters show a drop in second-quarter VC fundraising that’s pretty discouraging: between April and June, they raised a collective $1.7 billion, the smallest amount raised in any quarter since 2003, and split between the smallest number of funds since 1996.
VentureBeat says that the drop might be engineered, as venture firms wait until the worst of the economic storm has assuredly past before hitting up universities and heavy hitters for money. That said, the NVCA also says that the sector is poised for a definite contraction over the next five years.
How will this change startups’ chances for funding? Well, less money is never good, but it doesn’t spell an end to innovation as we know it. Venture partners will be looking for more established startups with detailed business plans and real prospects for revenue–in short, sure bets. Should they take risks on any unproven ideas, they’ll have to be particularly disruptive and have especially big upsides upon succeeding.