After Q1 2009 ended, Fred Wilson posted a piece on his blog addressing a deeper dive into the VC numbers with the released data of the PriceWaterHouse Money Tree report. The essence of his post was to point out the headlines of sharp decline don’t always tell the whole truth as a deeper look into the numbers shows that certain regions are definitely affected more than others.

When he wrote that post I was intrigued to look further in the Southwest region, the main investment region for EPIC Ventures.  I had looked out of personal interest right after Q1, but had not taken the time to post up on my blog.  But with Q2 near completion, I thought I would post this information and follow up with Q2 analysis when the numbers were released later this month.

I used the same data as Fred and also annualized Q1 of 2009, creating similar charts but with the addition of the SouthWest region. (Note that MoneyTree Report defines the Southwest as Utah, New Mexico, Arizona and Nevada.  EPIC does invest out of this region but our offices are located in Utah and New Mexico and we do like to invest close to home.)

My percentage change in capital investment did quibble slightly with Fred’s data in the sense that I found the percentage drops to be a bit larger in each area. I believe the difference in our data is due to Fred using more estimations and I using exact calculations. (And if anyone is incorrect, it would be me.=))  I show that there were some fairly significant drops in each region: 57% in Silicon Valley, 54% in New England and 31% in New York.  But interestingly, the biggest drop (out of the four charted above) was in the Southwest.  Though it looks minimal on the chart, investments dropped from $471m in 2008 to an $160m estimate in 2009, creating a 66% decrease.

The deal flow saw a decrease, but not as significant as the capital invested.  For instance looking at the decline of 2009 by the average number (not the 2008 only number which was used for the above capital percentage change), NY Metro was down by 13%.  A notable drop, but not nearly as much as capital invested.  Still the SouthWest region saw the largest decrease out of the four charted groups.

With Q2 numbers due in the near future, I am going to wait to opine on reasonings for this significant regional decline. However, feel free to post any thoughts or opinions in the mean time.