Recent venture capital report not all bad — MedCity morning read, April 22

Last weekend’s Dow Jones VentureSource report on venture capital funding in the first quarter confirmed our gut feelings – investments were down across sectors, even health care.

But the report wasn’t all negative, according to the Wall Street Journal’s Venture Capital Dispatch blog.

Writer Scott Austin searched VentureSource’s admittedly limited three-month database of research on venture deals to come up with these gems:

• Venture capital firms are still plowing money into early stage companies. That means investors aren’t just making bets on companies that already have products on the market.
• Investments in some regional hubs didn’t fall as hard as those in Silicon Valley, which tends to play hard and fast with investor money. While that region saw investments drop 57 percent to $1.14 billion from last year’s first quarter, the next-largest investment region, New England, saw a drop of only 15 percent to $594 million.
• Venture capital firms still have a lot of money to invest. Venture firms raked in $24.7 billion last year, according to VentureSource’s sister publication, Private Equity Analyst.

Writing for VentureBeat, Adeo Ressi, who is founding member of TheFunded.com, explained what he thinks are the reasons why VCs cut back on their investing in the recent quarter:

• Venture capitalists were asked by investors in their funds to slow down investing and calling in capital previously committed. Limited partners in venture funds had accumulated debt at a time when both equity and debt markets collapsed, so they didn’t have the cash to honor every capital call.
• Some venture partners asked their funds to abide by new accounting rules that required investment firms to value their holdings at market rates. That exercise tied up venture capitalists.
• Companies already in the portfolios of venture funds needed a lot more cash because of market conditions and the economy. Most venture capitalists had to re-assess their investments (which takes time) and invest more in some portfolio companies, keeping the investors from making new investments.

VentureSource noted that the first-quarter investment decline was the smallest for the health care sector – 34 percent. And Indicium Data LLC said in its OnBioVC report (pdf) for the quarter that investing in U.S. bioscience companies rose 3 percent to $1.43 million from the fourth quarter of 2008.

More stories worth a read:

• Transition Ohio manufacturers to medical device production (event) (Edison Materials Technology Center)
• University of Cincinnati College of Medicine prof leads doctors’ group (Cincinnati Enquirer)
• Positively Cleveland’s role in medical mart deal becomes a factor (Cleveland Plain Dealer)
• $500 million Wade Park VA building project continues (Cleveland Plain Dealer)
• Sonoma secures $12m to heal wrist, clavicle fractures (VentureBeat)
• Debate over public plan pulls health reform past ‘Kumbaya’ (Wall Street Journal Health blog)
• Health plans record a break-even year (Minneapolis-St. Paul Star Tribune)
• Many Ohio small businesses no longer covering employees (Columbus Dispatch)
• Wellpoint says 1st-quarter profit dipped on $288.8m investment loss, narrows outlook (Minneapolis-St. Paul Star Tribune/Associated Press)
• Health nominee Kathleen Sebelius clears hurdle (Los Angeles Times)
• Your health on the iPhone! (VentureBeat)
• Kendle stock plunges (Business Courier of Cincinnati)