Venture Capital

In a sign that green technology investing is bouncing back, Silicon Valley venture capital firm Khosla Ventures said Tuesday that it had raised $1.1 billion to spur development of renewable energy and other clean technologies. It is the biggest first-time fund in a decade and comes as venture capital investment in green technology is just beginning to recover from a precipitous fall prompted by the global economic collapse last fall. In the first half of the year, investments in green tech plunged to $513 million from $2 billion in the first six months of 2008, according to a survey by PricewaterhouseCoopers.

The venture capital market bounced back from a dreadful first quarter, but investments in Southern California were still sluggish in the second three months of this year, according to a report scheduled to be released today. Nationwide, investors put $5.27 billion into start-ups in the second quarter, up 32% from the first quarter, according to Dow Jones VentureSource. Southern California attracted $433 million in venture investment in the quarter, down 59% from the same period last year.

A little more than a year ago, Rajesh Razdan quit his cushy, well-paying job with a global cellphone company here to launch a small start-up that would offer a slew of new services to cellphone users. India's recent economic boom, he said, was the perfect setting in which to become an entrepreneur.

The recession has hit venture capital funding so hard that it's reverted to levels not seen since before the dot-com boom of the last decade. Funding for start-ups fell 50% in the first quarter from a year earlier to $3.9 billion, the lowest since 1998, as venture capital firms conserved their cash and focused on existing investments, a report scheduled for release today says.

Google Inc. has started a venture capital unit to fund new technologies. Google Ventures will invest $100 million in its first year and mostly target young companies, said Bill Maris, a managing director of the unit. The fund will invest in consumer-oriented Internet companies, healthcare, robotics and nanotechnology, he said. "We're not ruling anything out" in terms of investment areas, Maris added. The unit may help Google tap technologies that benefit the Mountain View, Calif.

The brutal economy has slowed venture funding to a tortoise's pace, and start-ups looking for money are finding themselves out of luck. For some companies, the answer had been to turn to angels -- individual investors who might be able to cough up a few thousand dollars to keep your doors open. But now it appears that even angel investing is slowing. Angels typically focus on getting companies off the ground and invest much less than established venture capital firms. The Tech Coast Angels, which invests only in Southern California companies and is the largest network of angel investors in the United States, plans to announce today that it invested 11% less in 2008 than the previous year.

When you're San Francisco's hottest start-up, you don't need to look for funding. The money comes to you. Twitter Inc. closed a $35-million venture capital round led by Institutional Venture Partners and Benchmark Capital. Co-founder Biz Stone said the micro-blogging service still had money in the bank from two earlier funding rounds, which totaled $20 million, but Twitter received "an offer we couldn't refuse."

Dear Karen: I'm embarking on an Internet business. How do I get venture capital funding or a small-business loan? Answer: Start-ups usually aren't eligible for venture capital funding or bank loans. Investors want proof of concept, and banks typically require two years' profit history and collateral before they write small-business loans. Save or raise funds yourself or borrow from friends and family.

Venture capitalists slammed shut their wallets during the last three months of 2008, investing 45% less in Southern California start-ups than during the same period a year earlier, according to a report scheduled for release today. The sharp fourth-quarter decline, to $422 million from $764 million, turned what was expected to be a full-year gain into a loss, according to the Dow Jones VentureSource report. Venture funding to the region's businesses in 2008 fell 20% to $3.2 billion.

The recession brought the U.S. market for initial public stock offerings to a halt in the fourth quarter, closing the worst year for IPOs since 1977, the National Venture Capital Assn. said Monday. No companies backed by venture capitalists went public in the fourth quarter, and only six staged IPOs in all of 2008, the association said. Emerging businesses also had trouble merging with larger companies, with just 37 venture-backed firms selling themselves in the fourth quarter.