Let’s not beat around the bush: the new data on venture capital investment released on Friday from Thomson Reuters isn’t pretty. In fact, it’s downright depressing. Venture capitalists invested only $3 billion in the first quarter of 2009, that’s down 61% compared to the first quarter ’08. Investment in all technology sectors were down by double digits, and clean tech start-ups—which were scoring massive investments as recently as last fall—not surprisingly took the hardest hit. Investment in that sector literally plummeted. Cumulatively, this data reveals that venture capital is at its lowest investment level since 1997, according to the National Venture Capital Association.
Here’s something that might surprise you, though: for most entrepreneurs, the news isn’t as bad as it might seem. What’s easy to forget amidst all the doomsday headlines is that for the vast majority of you working on a business plan, venture capital funding doesn’t really matter. Most entrepreneurs never seek VC funding, nor do they need it. Even out of those who do chase it, only a handful actually secure capital. It’s a dirty little venture capital secret that no one bothers to mention while blaring the news that investment is down.
While this is not to say that every entrepreneurs shouldn’t be concerned about the venture funding issue—we should, it’s indicative of the larger economic problems that face us all—you shouldn’t let this news dictate any major decisions you make regarding your start-up. Regardless of the prominent role venture capital takes in the news coverage of the start-up community, it’s simply non-factor for the typical entrepreneur.
What do you think? Does the news that venture capital investment is declining get you down?
