Venture capital still a mixed bag

In line with yesterday’s posting, the National Venture Capital Association released findings that demonstrate how little can be inferred from a statistical snapshot of the industry. Despite VentureOne announcing a continued contraction in the number of venture financed companies, the NCVA found that the amount of VC funding in the Q1 2005 more than doubled to $5.3 billion when compared to Q1 2004. Still, this figure is 13.5 percent lower than total funding last quarter.

At any one point in time, there will be conflicting data, especially in the volatile business of venture capital and private equity. What matters most is taking the correct long-term perspective on the market.

I grant VentureOne that the long-term perspective I’m advocating includes the bursting of the tech bubble, but I simply can’t believe that venture capitalists are still absorbing the lessons of five years ago. They’re too smart not to have figured out what went wrong, and how to prevent that from happening again. Instead, I think it’s the industry observers who need to pick up the pace of their analyses, and stop relying on yesterday’s explanations.