The U.S. venture capital investors have hit the brakes on investment in start-ups in the first quarter of this year, according to the Wall Street Journal.
The news report said the funding of the U.S. startups dropped 25 percent in the first quarter to $13.9 billion, compared to the fourth quarter of last year, and this is the highest drop since dot-com bust, citing data from Dow Jones VentureSource. The number of the deals stood at 884, a four-year low.
The Wall Street Journal said this downturn has been accelerating in Silicon Valley, where start-ups are downsizing their marketing budgets and lay off employees. This is because investors such as mutual funds and large banks, which poured money into start-ups in the hope of getting big return, reduced investment as the market is not booming.
The median value of the U.S. start-ups dropped to $18.5 billion in the first quarter of this year, which soared to a peak of $61.5 billion in the third quarter of last year, the news report said.
“I think investors are nervous, sitting on the sidelines waiting to see what happens,” Brian Mulvey, co-founder and managing partner at PeakSpan Capital," was quoted as saying by the Wall Street Journal.
The news report said the frozen IOP market for a new tech issue in the first quarter of this year is also a problem. During the same period, not even one venture-backed tech company went public, which is the first time in seven years. This implies that the dark mood reached to the point that start-ups are getting out of hand.
“There’s a general sentiment among VCs that there are fewer opportunities for exits with the IPO market pulling back and larger companies doing significantly less acquisitions,” Wesley Chan, managing director at Felicis Ventures, was quoted as saying by the Wall Street Journal.
