Venture capital market cut in half this spring

Investments in venture capital shrank by half this spring, as venture capitalists became discouraged by the poor exit market and low returns.

The Associated Press reported that venture capital investments in the past three months have totaled $3.7 billion - a significant decline from the $7.5 billion invested in the same period last year, according to statistics released this week by PricewaterhouseCoopers, Thomson Reuters and the National Venture Capital Association.

This quarter, which saw the second consecutive decline of more than 50 percent, marks a 12-year low for VC investments, the news provider reported.

Entrepreneurs and startup companies looking for business financing through venture capital had a much easier time not only during the dot-com boom from 1997 to 2001, but also in the years afterward, which consistently saw investments in the first half of each year total between $9 billion and $15 billion, said the AP.

Biotechnology and internet technology companies had a particularly difficult time, as they require particularly large amounts of seed capital. According to data from the AP, biotech companies received $888 million this quarter - down 16 percent from this time last year - and IT companies saw a decline of 68 percent to $524 million.

Although discouraging to investors and entrepreneurs, the shrinking of the VC market may serve a purpose, in that it may decrease startup valuations and raise exit multiples, said the Ewing Marion Kauffman foundation.