Dr Jeff Cornwall

U.S. venture capital investing reached its highest point in 4 1/2 years with $6.73 billion directed to 619 deals, according to the Quarterly Venture Capital Report released by Ernst & Young LLP and VentureOne. Overall deal count increased 3% from the second quarter of 2005, and the capital was 5% higher than a year ago, representing the most venture capital invested in a single quarter since the fourth quarter of 2001. Health care led the way in these investments.
Two things to keep in mind. First, this is very good news as venture capital investment tends to be a leading economic indicator. VCs see better days ahead, even if we are in a soft economic period in the short-run.
Second, these new ventures represent only a small sliver of business start-up activities in the US. Using recent data, we can estimate that there are over 1,600 new business with employees created every day. The tendency is to only focus on the deals with the big money behind them. While they matter, they are about 0.4% of business start-ups with employees; a point reinforced by Glenn Reynolds (of Instapundit) the other day at TCS Daily:

It seems to me that while big enterprises will always be with us, we’re going to see a much more vibrant small-business (and even micro-business) sector over the next decade or so. I also suspect that neither the culture, nor the people who purport to measure and manage the economy, are really up to understanding the impact of this trend.