This week’s Money Tree report showed that overall VC investment rose slightly from Q2 to Q3, but the picture is much bleaker if you focus on brand new deals, i.e. first-round financings.
VCs invested a total of $2.19 billion in 462 first-round deals in the first nine months of this year (see chart below). To find another nine-month period equally as bad, you have to go back to the third quarter of 1994 to the first quarter of 1995, when VCs invested a total of $1.77 billion in 480 first rounds.
The third quarter also marked the third consecutive quarter that came in below $1 billion for first-round deals. The last time we had three consecutive sub-$1 billion quarters was the fourth quarter of 2002 to the second quarter of 2003. Even in that dark period, VCs put more money to work in brand new deals than they are today. They invested a total of $2.49 billion in 549 first rounds from the fourth quarter of 2002 to the second quarter of 2003.