Venture capital deal making continues to grow in the U.S. – but NOT North Carolina. 

Here’s the headline on the latest National Venture Capital Association press relese:

“VENTURE CAPITAL INVESTING REACHES HIGHEST LEVEL SINCE Q4 2000 WITH $13.0 BILLION INVESTED DURING Q2 2014”

Note the graphic accompanying this post from Dow Jones Venture Source. Lots of good VC news.

Nationally, that is.

Not in N.C. where deals are scarce. 

The Skinny has heard all the blue-sky talk from venture capitalists for years. 

Good deal flow. The good deals will get done. “We’ve got dry powder.” Etc. Etc.

But members of the startup community know the facts are different.

Institutional venture capital, especially from North Carolina- and southeast-based firms, is drying up.

And without local support, entrepreneurs are having to turn more than ever to outside sources, such as Silicon Valley, for financial lifelines.

Want proof?

Just read the latest quarterly VC statistics from Dow Jones VentureSource and PricewaterhouseCoopers/National Venture Capital Association/Thomson Reuters. While deals nationally are flowing, in N.C. a drought remains. 

The “valley of death” – a term coined to capture the threat facing startups that can find angels and startup capital but need money to get to a next level of growth – is going to be the graveyard for a lot of promising Triangle ventures. Probably sooner rather than later.

All those companies coming out of The American Underground, the First Flight Venture Center, The Startup Factory, HQ Raleigh and elsewhere will face a life-ending crisis if money isn’t found – or the VCs who have some “dry powder” continue to sit on their limited partners’ millions and draw management fees.

Yes, despite a wealth of IPOs in 2013, numerous lucrative “exits” through mergers and acquisitions and the robust growth of investment-backed startups, institutional VC money has dried to a trickle. Whereas North Carolina once routinely ranked in the top 10 for venture deals, the Tar Heel state is becoming an afterthought.

Dow Jones reports a mere seven deals totaling $28.6 million for the second quarter. That’s the lowest since the first quarter of 2012 (eight deals, $19.5 million).

PWC’s MoneyTree report found 10 deals worth $32 million –  virtually all in the Triangle. That’s the worst since Q1 2012 when PWC reported seven deals worth a whopping $15 million.

But perhaps most alarming among the PWC stats is the fact that there were no “seed,” or startup institutional-backed VC deals in the quarter – or 2014 to date.

There were three startup-stage deals worth $14.8 million, but 18 deals and $76 million went to “late” or “expansion” rounds. In other words, VCs are focused on keeping existing investments alive.

Look at first-quarter deal and dollar numbers from PWC dating back to 2008 and post-recession. You’ll see the trend:

  • 2008: 21 deals, $154 million
  • 2009: 11 deals, $85 million
  • 2010: 17 deals, $118 million
  • 2011: 10 deals, $100 million (with rounding)
  • 2012: 7 deals, $37 million
  • 2013: 12 deals, $75 million
  • 2014: 10 deals, $32 million

How about the annual trend?

  • 2008: 59 deals, $516 million
  • 2009: 39 deals, $255 million
  • 2010: 57 deals, $421 million
  • 2011: 48 deals, $304 million
  • 2012: 35 deals, $182 million
  • 2013: 50 deals, $260 million

 Institutional VC beyond early-stage in North Carolina is becoming a joke – and a bad one at that.