US Venture Capital investment down 50%

In the past, I've addressed how an under capitalization can lead to the quick death of a startup. With that in mind, I saw some shocking information today. According to an article that has come across the VC PR Newswire, it seems that US venture investment is down 50% from a year ago. 

"New data from Dow Jones VentureSource shows that the U.S. venture capital industry continued to contract in the first quarter of the year. Venture capitalists invested just$3.90 billion in U.S. companies in the quarter, a 50% decline from the nearly $7.78 billion invested over the same period in 2008 and the lowest quarterly investment total since 1998. Only 477 venture deals were completed in the quarter, well below the 706 deals done in the first quarter last year and the industry's lowest quarterly deal total since 1996." (PR Newswire - http://news.prnewswire.com/ViewContent.aspx?ACCT=109&STORY=/www/story/04-18-2009/0005008209&EDATE=)

The article went on to note that the investments which have been placed over the first quarter of '09 have generally been made in later stage, lower risk companies. But what does all this mean for the entrepreneur and small business owner today? 

For one, you can generally expect credit and financing to be extremely tight, but this is nothing new. But this tightness may create new opportunities of its own. For example, consider a startup that wasn't able to get the funding it expected. This will cause the venture to reassess its strategy and potentially make hiring changes or look to find new methods of production or supply chain management. Depending on your situation, this could mean new opportunities. 

Finally, we all know that Philadelphia has a strong healthcare and bio startup scene as well as a growing technology and creative industry. Dow Jones newswire reports that healthcare saw the smallest impact, while unfortunately, internet services (which represents most web2.0 ventures) has seen a 61% decline from this time last year. 

All things considered, forget about getting the big VC investments and go back to the drawing board. Look for ways to avoid spending (and hence requiring) capital and focus on grassroots and guerilla strategies.