Q3 VC investment is down... no, up... wait

Conflicting reports from PwC/NVCA MoneyTree and Dow Jones make headlines hard to write

Q3 was either better or worse for venture capital investment.

The latest MoneyTree report, based on data from Thomson Reuters, PricewaterhouseCoopers and the NVCA, contends venture investments rose 17% from $4.1 billion in Q2 to $4.8 billion in Q3. Dow Jones said Saturday venture investment slid 6%, from $5.27 billion in Q2 to $5.1 billion in Q3. So, yeah, the VC recovery is either not fake or kinda is still.

Both reports are based on surveys of professionals in the venture industry, augmented by additional research.

Tracy Lefterroff, who runs the VC practice at PwC said the numbers were encouraging. "With the signs pointing to an economic recovery, albeit a slow one, we're likely to see the pace of investing continue to strengthen over the next several quarters as long as the IPO markets begin to open up and M&A activity increases. And, as predicted last quarter, we expect to see annual investments for 2009 exceed the $15 billion mark given the continued strength we saw in investing this quarter."

Ahem. "As long as the IPO markets begin to open up and M&A activity increases." A rather loaded qualifier, that.

Meanwhile, Jessica Canning, director of global research for Dow Jones VentureSource is tempered. “The slow recovery we’ve seen for venture capital has faltered. As liquidity and fundraising lag after the economic meltdown in 2008, investors have no choice but to keep a tight rein on investments until the industry is on more solid ground.”

Upshot: VCs are still skiddish. Until they close their rounds with LPs, they won't be able to strategize for the long-term. As Peter Thiel recently pointed out, it's a question of faith. Investing in VC, he said, is like Paschal's Wager: either a rosy U.S. economy will exist in the future, or it won't. If it exists, LPs will benefit from investing in VC; if it doesn't, we're all up a creek anyway--might as well invest (my paraphrase of a second-hand paraphrase. I know, great reporting. The point's still valid.)

Whether VCs will be able to channel any of their investors' faith in the U.S. high-growth market remains an open question.

Links:
PwC/NVCA MoneyTree Report Press Release
PwC/NVCA MoneyTree Report Charts and Data
Dow Jones VentureSource Press Release, Charts and Data