The Funded’s Adeo Ressi’s prediction that 2010 will be the year of the angel investor, seems to be coming true.
In the second quarter, venture capitalists invested $6.5 billion, an impressive 34% increase from the prior quarter. Not so impressive? The amount of money they pulled in. According to Thomson Reuters and the National Venture Capital Association, venture capital funds only raised $1.9 billion in the second quarter— a 48% drop from the prior quarter. While VC fundraising can be somewhat cyclical, $1.9 billion is far lower than any quarter during the recession.
In fact, that’s the lowest level raised in roughly seven years.
On today’s episode of TechCrunch NOW, Ressi and I discussed this growing gap between VC investment and their ability to raise funds and what that means for the market as a whole. “Venture capitalists are living on borrowed time, no matter how you look at it there’s going to be a reconciliation,” he says. “They’re spending money from ages old today and in the future they’re going to have a lot less money at their disposal to invest.”
According to Ressi, the investment landscape is dramatically shifting, as venture capital becomes a less prominent asset class and a new generation of entrepreneurs-turned-angel investors fill the power vacuum. Amusingly, he says, he knows more and more venture capitalists who are tackling smaller angel investments, as they adapt to this new paradigm. See video above.
We’ll be sure to get the other side of this debate on an upcoming episode of TechCrunch NOW.