Venture Capital Investments Start To Recover In Maryland
The last two years have been brutal in venture capital given the economic condition, but we are starting to see a recovery as recent statistics from Maryland reveal.
For there to be venture capital, there must be funding for VC funds. The economic crisis of late 2007 that evolved into the disaster known as the Great Recession of 2008 and 2009 decimated the venture capital industry much as it hammered most financial niches. Companies looking for funding had a real problem, a fact I probably don't have to tell you.
Has venture capital recovered now that we are coming out of the Great Recession? In a word - no. The figures on investments being made, funding rounds and pretty much any measure you choose to analyze are a pale shadow compared to the pre-recession years. That doesn't mean that we are not starting to see some positive movements. We are.
An analysis of funding out of Maryland has recently proved as much. Companies in the state saw an increase in funding of 41 percent in the first quarter of 2010 compared to the same period in 2009. The total investment amount was $61 million. If the trend holds for the remainder of the year, a 40 percent increase would appear to be a tremendous rebound in the VC markets. Unfortunately, the numbers are still less than half the figures seen in the state for 2006 and 2007.
There is a second issue that arises with these numbers. While funding may be coming back, the specific type of funding provides us with a serious cautionary note. The companies receiving funding are late stage companies already producing revenues. Start ups seeking seed money received next to know funding of significance. This would seem to suggest that VC funds are being very cautious with their funds.
Overall, the number out of Maryland should be viewed positively. They represent a positive development in venture capital, but are not a sign that the troubles of 2008 and 2009 are definitely over.