VentureBeat just blogged about some new statistics published by Thomson Reuters and the NVCA in this post: Venture fundraising: Going, going, gone?.

Here is the most damning/shocking excerpt from this post:

Venture capital funds raised only $3.4 billion in the last three months of 2008, according to new data from Thomson Reuters and the National Venture Capital Association. Unsurprisingly, this is a big drop (about 70.9 percent) from the same period in 2007, when venture firms raised $11.7 billion, and also a substantial decline from the $8.4 billion raised in Q3 of 2008.

In my previous post, A Time for Change in Venture Capital, I’d guess-timated that a 50% reduction in the total money going into venture capital is not inconceivable, but a 70% decline is even more severe. I would still hazard a guess that Q4 2008 was by far the worst economic time for venture fund-raising — primarily because the LP portfolios were so battered that no one was really in the mood to talk about new commitments to venture (and even especially given that the returns on venture capital have been nothing but disappointing for most LPs). Depending on how 2009 shapes up, chances are that the 2009 numbers will perform better than the 70% decline for Q4 2008. Very curious to see how this year plays out for the venture industry.

Peter Rip, General Partner at Crosslink Capital recently authored a post on his blog EarlyStageVC that has been getting a lot of attention. Peter’s post “The Coming Venture Capital Boom” presents a view that is hard to find these days. I had a mixed reaction to Peter’s comments. To a large extent I agree with him that there will be another boom in venture capital. After all, the industry does move in cycles and the boom and bust cycles are essential for survival of the ecosystem. This was best described in a quote by Kanwal Rekhi, Managing Director of Inventus Capital Partners: “A recession is like a forest fire. It frees up resources for the newer generation of companies.”

So I agree with Peter that there will be another boom coming in venture capital — it is inevitable. I would add though that before that boom happens, and before venture firms can benefit from this upcoming boom, there need to be some changes. The current environment provides enough momentum and incentive for a change in the venture capital industry. It is my opinion that there needs to be a clearer distinction between which firms are doing “early-stage” deals and which firms are doing “growth-stage” deals. The practices in venture have evolved but the nomenclature for stages of deals has not — for example, is Series A really the first round of funding for a company? Not any more.

Peter also makes the case for “great restart and late-stage opportunities.” Though that may indeed be the case, there are more companies that will go under because they cannot raise new capital and their existing backers do not want to participate. There will be some companies that may go through a restart; but a restart is really a softer way of saying re-cap. The re-cap benefits the new investors that come in and do a downround, but it is very demoralizing for the entrepreneurs and the team. Downrounds might be an opportunity for VCs, but they’re not fun.

I do agree about the separation of the wheat from the chaff in this economy and an overall improvement in the quality of entrepreneurs and startups. The Darwinian nature of the environment makes sure that only those who are truly commited and devoted to making their companies succeed will persevere. I also agree with the rest of Peter’s comments, especially his three points regarding the silver lining.

I’ve maintained that “It is never a bad time and always a good time to do a startup.” Doing a startup is hard regardless of when you start and it is only “Insane perseverance in the face of complete resistance,” (:Jack Thorne) that can make a startups succeed. There will be another boom in Venture Capital — it will just be after we get through the current environment and hopefully change for the better. In the meanwhile, there are still good companies out there and there is still money out there for those good companies.