Since the IPO market opened up for consumer Internet companies in 2011 - Zynga, Groupon, LinkedIn, Pandora and more - the dollar volume invested in private deals by venture capitalists is starting to slow down.
After significant fund flows into start-ups in 2011 (fifth largest year in the last 10), venture investing fell 18% year-over-year to $6.3 billion across 717 deals in the first quarter of this year, according to a just-released report from Dow Jones VentureSource. It was the lowest quarter of investment, since Q3 2010.
The declines were across the board, but consumer Internet companies saw a big drop, mainly due to fewer financings of later-stage deals that have eventually gone public, such as Zynga and Groupon, or have raised a significant chunk, like Twitter and LivingSocial.
Investments in this space, which includes social media, entertainment and shopping, fell 76% while number of deals fell 17% to $375 million for 88 companies. That's mainly because in the first quarter of 2011, Zynga and LivingSocial closed $870 million combined.
Zynga went public in December of 2011 at $10 a share. Groupon went public in November at $20. Meanwhile, LivingSocial raised $176 million in December 2011. Twitter raised $400 million in July and $300 million in December.
“Now that some of the mature Internet companies that soaked up billions in venture capital the last couple of years have gone public or are near an exit, we’ll see if ventureinvestors approach a fresh crop of start-ups with the same zeal or if investment remains at the level we saw in the first quarter,” said Zoran Basich, editor of Dow Jones VentureWire, in a release.
Among the top consumer Internet financings in Q1 2012 include Path's recent fundraising of $40 million, BeachMint's $36 million raise, Vox Media's $17 million raise, Polyvore $14 million, and Wheelz' financing of $13.7 million.
The VCs that were most active include First Round Capital, with six deals, Accel Partners and Greylock Partners, with five each and Google Ventures and SV Angel with four each.
(Image source: geekwire.com)