May 6, 2005--Venture capital investment remained largely unchanged in the first quarter of 2005, according to a survey released last week.

The PricewaterhouseCoopers/Thomas Venture Economics/National Venture Capital Association MoneyTree Survey found that venture capitalists invested $4.6 billion in U.S. companies last quarter. While this represents a downturn from Q4 2004 investment -- $5.9 billion -- the survey's authors do not believe that it indicates any long-term trend.

Mark Heesen, president of the National Venture Capital Association (NVCA), said that the first quarter data falls within the "RIPE zone" -- rational, investable, performance-driven, equilibrium -- of $4-6 billion, where it has been for the last four years.

But funding to start-ups and companies in the early stages of development remains stagnant, as firms continue to invest heavily in more developed companies.

While Heesen said that he expects this trend to change, George Lipper of the National Association of Seed and Venture Funds (NASVF) disagrees.

Lipper compared Q1 MoneyTree reports since 1998 and found that seed investments have fallen dramatically. While they accounted for 10.5% of all investment in the first quarter of 1998, they account for only 1.6% in the latest survey.

In contrast, larger companies claimed a 40% share of venture funding, a 10-year high.

Venture capitalists have become more conservative and more efficient in doling out money since the 2001 downturn, according to Lipper.

"Before, there was so much venture capital that people were putting business plans on napkins," Lipper said. "The venture capital community learned from that failure."

As a result, entrepreneurs have been forced to look increasingly toward angel investors for seed capital.

"Angel groups are growing like weeds," said Lipper, who expects the trend to continue in the near future.

There was at least one bright spot in the survey: First-time financings continued to trend upward, increasing to $1.2 billion -- 26% of all venture funding, representing a five-year high.