Monday, January 19, 2009

Mass. 2008 VC decline is twice U.S. average

By Galen Moore

Venture capital funding for Massachusetts startups shrank by 16 percent in 2008, dropping from $3.7 billion to $3.1 billion in year-over-year figures released over the weekend by Dow Jones VentureSource. The drop here was nearly double the national average of 8.3 percent and reversed growth achieved in 2007. Among states that were in the top five for venture capital economies in 2007 and 2008, only Washington state saw a more steep decline, compared to its total 2007 investment.

Massachusetts companies got 277 rounds of funding in 2008, down from 325 the previous year. The average round was $11.2 million, down slightly from $11.4 million in 2007.

Nationwide, venture capitalists in 2008 invested $28.8 billion over 2,550 deals. California led the states, with $14.6 billion in venture funding over 1,121 deals. Total venture dollars into California startups dropped only 1.5 percent over 2007.

New York, Texas and Washington rounded out the top five states both years, posting 2008 investments in the amount of $1.5 million, $1.2 million and $900,000 respectively.

While Massachusetts’ share of the venture capital economy dwarfs that of other New England states, Rhode Island and New Hampshire managed to post significant gains in 2008. Rhode Island’s venture capital funding grew by a factor of more than ten, from $4.2 million in 2007 to $51.8 million this past year, while New Hampshire investing grew to $158.8 million, an increase of 19.4 percent. Connecticut’s VC investment fell precipitously, dropping 60.1 percent to $142.9 million. Vermont posted $14.7 million, a 33.7 percent drop; while Maine saw investing fall off by 74.1 percent, to $2 million.

Quarter over quarter, Massachusetts saw its biggest drop in the fourth quarter of 2008, when VC’s invested $658.1 million, compared to $991.8 million in the fourth quarter of 2007.