The results are in for the first quarter in venture investing and they are positive. After a tough 2009, the first quarter resulted in a significant increase in venture capital investing. The Dow Jones report for global venture capital investments increased by 13% over last year http://bit.ly/1Q10Glbl. The US continues to take the lead with 65% of deals by numbers (and 67% by value). This growth is confirmed by my discussions with Silicon Valley Bank who have told me that they have seen a significant increase in the number of new bank accounts opened for startups. In fact, SVB told me that the number of new accounts in March was more than all of the accounts opened in both January and February. This increase reflects the general optimism expressed in DLA Piper’s 2010 Technology Leaders Survey. http://www.dlapiper.com/US/news/detail.aspx?news=694c8f9d-faf5-40d2-8018-7c352437288f.
The growth in the US was roughly the same as the global average at 12%. http://bit.ly/1Q10Fin. Venture capitalists invested $4.7 billion in 578 deals. And the shift in the relative amounts of investment among industries continues to shift. For a long time, IT represented more than 50% of deals, yet in the first quarter, IT was only 32% of the deals. The IT investments in the first quarter represented a 15% increase over the same period last year. However, the cleantech category increased by more than 69% in the same period.
But I think that these comparisons in the IT sector may mask the new reality of starting software and web companies where the cost of developing a product has plunged due to the use of open source software and cloud services. In the past, a software startup would need to buy its own servers and proprietary software development tools, representing significant capital expenditures. Now, most of my software companies use open source and other pre-existing software to “assemble” their products and host them on the cloud. They require much less money to start; and they wait to seek traditional venture capital until they are much further along in product development and distribution.