Are venture capital investments getting sideswiped by the financial turmoil? So far, the answer is: not really. Venture investments did slow in the first quarter of 2008, but the decline in financing to startups had less to do with the ripples of an ailing economy than a sudden dropoff in investments in the biotech sector. According to Dow Jones VentureSource, VC firms invested $6.8 billion in U.S. companies during the March quarter, down 7% from a year ago. Recent quarters had been showing a slow but steady increase in the amount of money invested by VCs. For the most part, VCs were not making smaller investments as much as they were financing fewer startups. Only 603 companies received venture money, 25 fewer than a year earlier. VentureSource cautioned that one slow quarter doesn't necessarily signify a trend. "While we are watching closely to see if the slowdown in the overall economy will infect the VC community, it's simply too early to know for sure," said Jessica Canning, VentureSource's research director. "The venture industry is usually insulated from the immediate effects of an economic downturn. The biggest decline in investments came in health-care companies, which declined 43% to $1.74 billion, spread throughout 142 companies. A year ago, 175 deals received $3.06 billion. Hardest hit were biopharma startups, which saw 59% less VC money this quarter. Venture capitalists say they take a long view on investing, looking for exits five years down the road or more. In recent years, a recovering IPO market may have accelerated the time schedules for incubating a young company. But the IPO market is one of the first to react to economic downturns, as investors grow gun-shy about often unproven startups going into a bear market. VentureSource noted that IPOs are the preferred exit for biotech companies in particular. And the quarter was a bad one for VC exits. Only 5 VC-backed startups went public, raising $283 million. Both were the lowest figures since the June quarter of 2003, the National Venture Capital Association said. And only 56 venture-backed companies found exits through M&A deals, the smallest number since the fourth quarter of 2000. Last quarter, as the IPO market grew quiet (despite the well-received entrances of Visa ( V), Heritage-Crystal Clean ( HCCI) and Asia Time ( TYM)) however, VC firms didn't shy away from late-stage investments, which typically are among the largest they make. Late-stage rounds comprised 39% of first-quarter venture fundings, up from 32% a year ago. It was the seed rounds and first rounds that saw the declines, dropping to 35% of the total from 42% last year. Bucking the trend, however, were information technology companies. Investments in IT startups more than doubled to $1.59 billion for 170 companies, as VCs tried to find startups that could tap into the fast-evolving Web. VCs may have been also taking a cautious tone from their own investors. In a separate report that received little attention earlier this month, the NVCA said money flowing into VC funds in the first quarter slowed somewhat. In the March quarter, 57 VC funds raised $6.3 billion, less than half the $11.7 billion raised in the previous quarter. It was the smallest number of funds raising money since 2005. In addition, the dollar amount was the lowest since the March quarter of last year, when 83 VC firms raised money. Only 5 of the 57 firms raised money for new funds, the rest were follow-on investments for existing funds, a percentage that the NVCA said was remarkably low given recent quarters. The decline comes after VC firms raised $96 billion from 2005 through 2007 -- it may be that funds' appetites may have been sated for now. So yes, there was a modest slowdown in the investing that VC firms did during the first quarter, backed up by a slide decline in the money they, in turn, were raising from their own investors. Those investors, largely pension and institutional funds, are anything if not cautious these days.