VC investment stalls in 3rd quarter

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Investments in U.S. venture-backed companies stalled in the third quarter, putting 2009 on track to be the worst investment year since 2003, according to data released late Friday from industry tracker Dow Jones VentureSource.

Venture capitalists invested $5.1 billion in 616 deals in the third quarter of 2009, down 6 percent from the $5.4 billion put into 595 deals during the second quarter of this year. That’s down 38 percent from the $8.2 billion invested in 663 deals during the third quarter of 2008.

“The slow recovery we’ve seen for venture capital has faltered,” said Jessica Canning, director of global research for Dow Jones VentureSource, in a statement. “As liquidity and fundraising lag after the economic meltdown in 2008, investors have no choice but to keep a tight rein on investments until the industry is on more solid ground.”

Investment in the Silicon Valley/Bay Area fell 33 percent compared to the third quarter of 2008 with $2.2 billion with 183 deals completed. That represents about 45 percent of all VC investing in the country.

Investment in the information technology sector regained the lead from health care, which outpaced the sector for the first time on record in the second quarter of 2009. IT companies raised $1.9 billion in 270 deals during the third quarter of 2009 while health care saw $1.7 billion invested in 184 deals.

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