Further evidence of the global economic slowdown was revealed yesterday with the news that investment in US-based IT startups dropped a massive 40 percent in the fourth financial quarter 2008.
According to figures obtained by CNet
– quoting a report by VentureSource – investment in IT related companies across the US fell by a massive 40 percent in the fourth financial quarter, representing a loss of almost £1 billion compared to the previous quarter.
Overall venture capital provision for IT companies dropped 14.5 percent year-on-year, and the report shows a clear indication of why: despite positive growth in the first quarter, IT companies started a process of financial decline in the second quarter which only accelerated through the remainder of the financial year.
With venture capital money harder to find – especially for telecommunications and networking start-ups, which saw investment drop a whopping 32.3 percent in 2008 – many newly formed companies are struggling to keep themselves afloat for long enough to become cashflow positive. With investment drying up, the danger is for the market to become stagnant – and for many advances in technology to be ignored in favour of “tried and tested” systems.
It hasn't all been bad news for the IT sector, however: the report showed that – despite a Q4 fall in investment of 30.5 percent – the information services sector came out of last year smelling of roses, showing a 16.9 percent gain in investments when compared to 2007.
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