Peter reported on a very upbeat VC study in his last post.  I'm not disagreeing with the study, but I'm not sure I'm ready to declare anything close to robust investment activity.  The reason I'm skeptical is that the most recent MoneyTree Report from PricewaterhouseCoopers LLP and the National Venture Capital Association (July 21, 2009) is claiming that although there's an "overall increase in investment levels...," the number of deals has remained flat at 1996/1997 levels.  Couple that with a virtually non-existent IPO market leading to a backlog of venture-backed firms looking for an exit, and it's not exactly the ideal picture.

What does this mean to all you entrepreneurs looking for seed and early-stage funding?  VCs are reluctant to add any more early-stage ventures to their already time-consuming portfolios, especially when the exits for their existing ventures is looking a lot farther out.  Remember, that without exits, VCs can't give their investors a cash return, and those investors often don't have a lot of patience.

So how about the angel investment community?  It's still out there investing, but in fewer new ventures, and they want to see some sales before they risk their capital.  Remember that angel investors, even though they often band together to invest, are still individual investors who are investing their own money.  Just like the rest of us, they've seen their stock portfolios decline in this rocky economy, so they're definitely more risk averse.

So where is the light at the end of the tunnel?  Hard to say, but one thing is certain.  Entrepreneurs will need to invent new ways to raise the capital they need for their start-ups and they will need to focus on quick, early sales to prove their concepts so that angels who are investing will find their ventures attractive.  Would love to hear your ideas for innovative ways to capitalize a new business.