IVCA Releases First-Quarter 2009 Private Equity Monitor

June 16, 2009

CHICAGO - “ Venture capital investment in Illinois slowed markedly in the first quarter, in pace with the slowdown in VC investment nationally with the sharp downturn in the U.S. economy.  Illinois venture capital investment fell 48.5 percent in the first quarter compared to the first quarter a year ago, to $40.5 million, according to the Illinois Venture Capital Association based on data provided by Thomson Reuters' VentureXpert.  

Venture capital investment declined 45 percent nationally, totaling $6.2 billion. Twelve Illinois companies received funds in the first quarter this year compared to 17 companies that received a total $78.7 million in the first quarter of 2008.

Buyout capital investment in Illinois companies also declined, with half as many companies receiving only about one-eighth as much in buyout funding in the quarter compared to the year-ago period. Twelve companies received a total of $14.1 million in buyout investments compared to 24 companies that received $112.3 million in the first quarter last year.  Nationwide buyout capital investment was only about 39 percent of what it was in the first quarter of 2008.

It is understandable that new investments would be down.  Given the M&A and IPO markets, Investors continue to assess and manage current portfolio companies rather than invest in new companies.  Uncertainty in both state and federal tax and regulatory policies add to investors' caution.

Venture capital investment in Illinois healthcare companies was one of the bright spots during the quarter as financing in the first quarter of the year jumped sharply from the first quarter last year and was about even with the second quarter of last year.

Investment in two Illinois healthcare companies totaled $6.9 million in the quarter compared to $1.3 million in two companies the first quarter last year. VC investment in information technology companies slipped only slightly from a year ago, to $21.7 million, from $25.1 million a year ago.

Illinois ranked 14th in the United States in attracting venture capital in the first quarter, while California topped the list with $2.4 billion in VC investment and Ohio in second place at $586.4 million in the quarter. As for buyout-related investments, Illinois ranked 23 on the list, with California again topping the list and New York second.

Only one - œgreen-  company received venture capital funding during the quarter, which was the same as in the first and second quarters of last year.  Total investment in green companies was not available.

The pace of venture and buyout capital funding in Illinois also was well below the five-year quarterly average.  The 12 companies receiving venture capital funds in the first period was below the quarterly average of 20, while total funding of $40.5 million was below the average of $131.9 million.

Twelve companies received $14.1 million in buyout funding in the first quarter of 2009, also below the five-year quarterly average of 16 companies that received a total average of $214.2 million.