Today the NVCA along with PwC released the Q3 2011 MoneyTree venture capital investment numbers which are based on data from Thomson Reuters.  Not surprisingly, quarterly investment is down overall from Q2 as the industry begins to adjust to the lackluster fundraising and exit markets.  You can not invest money you don't have, and as more firms postpone raising follow-on funds, we can expect a continued slowing of investment.

Interestingly, the quarter saw significant decreases in both life sciences and clean tech investment, two sectors that are extremely sensitive to the public policy environment.   The biotechnology and medical device sectors have been challenged by an unpredictable FDA regulatory process in recent years as demonstrated by our Vital Signs report which came out at the beginning of October.  The long-term viability of clean tech sector has been questioned in light of a Congress that has offered little policy support over the last several years for emerging clean technologies.  Both of these sectors represent exactly the types of companies in which the venture industry should be investing.  The promise of innovation has never been greater and for that reason, life sciences and clean technology will continue to be key venture investment sectors, but not without challenges. 

For those investing in IT which is booming, you are not immune to policy changes either.  Government budget cuts will be inevitable in the coming year which will curtail  federal, state and local government spending on your products.  Patent reform will change the way you address IP issues.  Immigration policy may prevent you from investing in foreign born entrepreneurs.  And, maybe most importantly, the capital markets continue to be laden with regulatory burdens that impact all venture-backed companies’ ability to successfully go public or be acquired.

Never before has public policy been so poised to weak havoc on our industry and on the companies in which we invest.  But never before has the industry been better poised to make our case for a policy environment that fosters company formation and job creation.  The NVCA has been extremely active on Capitol Hill in the last year and our advocacy efforts will only increase in the areas of FDA reform, capital markets regulation, energy policy, immigration and tax issues.  The future of U.S. investment in  American innovation -- across all sectors - -depends upon it.

More MoneyTree information is available including:

National data, including breakouts by industry sector, stage and first time fundings

Regional data byMoneyTree region and state

Top 10 deal list for Q3