Venture capital keeps getting squeezed as an asset class. The second quarter of 2009 saw the lowest level of capital going into VC funds since the first quarter of 2003, according to the National Venture Capital Association (NCVA). During the second quarter, VC funds in the U.S. raised only $1.7 billion, an 82 percent drop from the second quarter of 2008, when $9.3 billion was raised. The amount raised is 63 percent less than than the $4.6 billion raised during the first quarter of 2009 (see interactive iCharts below).

The number of funds which raised capital also dropped in half from last quarter to 25 funds, a 13-year low. And the average amount of new capital going to each fund was $68 million, down from $94 million in the previous quarter.

Capital is fleeing the sector, partly because there is less capital to go around, and partly because venture capital exits appear to be blocked. Although there was cause for hope during the quarter—which saw five venture-backed IPOs poke their heads above the water—the NCVA doesn’t expect venture funds to bring in major new infusions of capital until 2010.

For startups with proven traction there is still money out there. For instance, Pandora just raised a massive $35 million round last week and we tracked $6.4 billion in venture money going into companies last quarter, a 25 percent drop from the year before but still a healthy rate of investment. VCs are getting more selective about where they put their cash, but when they do they are more likely to bet big.

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