2012 has been a bad year for venture activity in the city of Portland, which is just starting to step out of the shadows of northwest technology behemoths San Francisco and Seattle. Venture funding was down statewide in Oregon 55% so far in 2012 according to a new study conducted by the National Venture Capital Association and PricewaterhouseCoopers.
According to Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC US, there has been a drop-off in venture activity in the third quarter of this year nationwide, although the national figures are not as severe as Oregon’s steep decline. Nationally, quarterly venture capital investment activity declined 11 percent in terms of dollars and five percent in the number of deals compared to the second quarter of 2012. So far, the total investments for the first three quarters of 2012 ($20 billion into 2,661 deals) fall well below 2011’s figures.
“The decline in funding for Seed/Early stage companies is firmly in place – we’ve seen a drop in dollars and deals both quarter-over-quarter and year-over-year,” notes Lefteroff. “We’re seeing fewer new venture funds being raised which means less capital is available for new investments. And, we’re seeing venture capitalists be very cautious with the capital that is available due to the lack of asignificant number of liquidity events. Instead, venture capitalists are continuing to support the companies already in their portfolio.”
Of the industries surveyed nationwide, clean technology saw the biggest decrease in investment dollars, losing 20 percent. Media and entertainment, semiconductors, telecommunications and IT services all experienced a decrease in investment as well. Industries that witnessed an increase in venture capital investmaent include: financial services, healthcare services, business products and services, and retail.
Despite the growing number of incubators and accelerators funding seed stage deals nationally, overall the news is grim when it comes to seed stage investment. Seed stage investments fell 22 percent in dollars and seven percent in deals with $178 million invested into 67 deals in the third quarter of 2012.
One big win for the Portland startup industry happened in the third quarter of this year, with Cloudability raising $8.7 million in a Series A round lead by the Foundry Group, located in Boulder, CO.
Despite the well deserved startup cheerleadering coming from Portland, the fact remains that venture activity is significantly lower there than average venture activity nationwide. Hopefully growing accelerators like PIE and Portland Seed Fund will be able to continue to import investors to supplement local venture activity.