VC funding drops: Thomson Reuters

PALM DESERT, California (Reuters) - Investment in U.S. start-ups dropped 71 percent in January from a year earlier, preliminary figures by Thomson Reuters showed on Monday.

Venture capital funding dropped to $1.3 billion in January from $4.5 billion in January 2008, and the number of companies which received funds dropped by more than half, to 203 from 466.

Funding per company dropped on average to $6.6 million from $9.76 million. The figures were compiled by Lawrence Aragon, editor of Venture Capital Journal.

By contrast, the figures from an earlier recent period were not nearly as extreme.

In the last quarter of 2008, venture capital funding dropped 16.9 percent to $11.96 billion from $14.4 billion a year earlier. The number of companies dropped to 1,391 from 1,648, according to Aragon.

Aragon said the numbers likely mean investors will work hard to make sure the companies in which they have invested survive and will be less likely to invest in new companies.

"They are in protection mode," he said in a telephone interview.

(Reporting by David Lawsky; Editing by Phil Berlowitz)