But unlike the Treasury Department’s interest in improving access to public markets–-which has led former National Venture Capital Association Chairwoman Kate Mitchell to form a task force to develop recommendations–-the SEC initiative could make staying private more compelling, which is not something the venture industry wants.

NVCA President Mark Heesen reacted coolly to the SEC’s plans, outlined in an April 6 letter from SEC Chairwoman Mary Schapiro to U.S. Rep. Darrell Issa (R, Calif.), chairman of the House Committee on Oversight and Government Reform. Schapiro said the SEC is reviewing the ban on general solicitation of private offerings and the number of shareholders, currently 500, that trigger public reporting, among other issues.

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Thirty-six U.S. venture-capital funds raised more than $7 billion in the first quarter of 2011. That’s up 76 percent, by dollar commitments, compared with the first quarter of 2010, which saw 44 funds raise $4 billion, according to Thomson Reuters and the NVCA.

Bessemer Venture Partners VIII raised $1.6 billion during the quarter, while Sequoia Capital 2010 raised $1.3 billion and J.P. Morgan’s (JPM 46.97, +0.13, +0.28%) Digital Growth Fund raised $1.2 billion.

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That is my conclusion from two recent press releases: the 2010 fund-raising data from Dow Jones, and the 2010 review of exits from the National Venture Capital Association. Neither release reads that way but the laws of supply and demand make it, from here on in, pretty inevitable.

Looking first at cash invested into venture funds themselves, the Dow Jones press release shows that funding fell to “a seven-year low” of $11.6 billion in 2010. The real meaning of this becomes clear if you take a much longer perspective and look at venture capital funding over the past 25 years and compare that to the overall size of the U.S. economy. The assumption is that the best way to think about the supply of capital is in relation to the size of the overall economy and thus, the overall pool of likely opportunities.

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Who would’ve predicted last December that Google would chase after venture-backed group-buying website Groupon with more than $5 billion in hand? Or that San Francisco hotspot Bin 38 would become embroiled in controversy for hosting “Angelgate” (which would inspire this T-shirt, and this Wikipedia entry)?

Turning our attention to 2011, we decided to ask the insiders – venture capitalists and start-up CEOs – to tell us what news they think will light up the tech blogosphere in the new year. As part of a wide-ranging survey sent to a few hundred VCs and CEOs by the National Venture Capital Association and Dow Jones & Co., which owns The Wall Street Journal, we asked them to “predict a major news headline related to the start-up community in 2011.”

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The latest numbers from PricewaterhouseCoopers and the National Venture Capital Association show third-quarter investment in New York rose 22 percent over the last year to $335 million. More than 60 percent of those deals were early or seed stage investments, which came from the city’s active Angel community and a new generation of VC firms like Betaworks and Union Square Ventures.

Many of New York’s hottest companies have also seen their latest rounds led by outside investors. Last month advertising platform AppNexus secured a $50 million round led by Microsoft, and in June the location-based service Foursquare received $20 million in Series B funding from the California-based Andreessen Horowitz. Boston VCs have been especially active with Matrix Partners, Spark Capital and General Catalyst, aggressively adding New York companies to their portfolios.

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Mark Heesen, president of the venture-capital trade group, and Emily Mendell, vice president of strategic affairs, weren’t shy about answering that question last week on the sidelines of the Dow Jones Private Equity Analyst Conference. While they appeared comfortable lounging in oversized chairs above the lobby of New York’s Waldorf-Astoria, they are anything but relaxed when thinking about what lies ahead.

Never before has the NVCA faced so many defining moments at once. Venture firms have now gone a full decade without collectively returning a dime, causing their investors like pension funds and university endowments to question whether the venture capital model even works. As a result, a staggering number of poor-performing venture firms are expected to go out of business in the next few years.

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Home to giants like Facebook, Google (GOOG), Apple (AAPL), Intel (INTC) and eBay (EBAY), Silicon Valley is well known as the Mecca for high-tech companies – and entrepreneurs hoping to start one. One third of US-based venture capital investment happens in the Valley, according to PriceWaterhouse Coopers and the National Venture Capital Association. By Cleveland’s own admission, he “couldn’t go into a cafe without hearing pitches” in San Francisco.

So why go east? A recent Princeton grad, Cleveland said he left primarily because of his customers. Art.sy is an online trading post for fine art and, according to Cleveland, over half of his market is in New York City. But Cleveland added that location isn’t everything. New York’s tech scene is booming, and Cleveland wanted to join the party.

“Palo Alto is like Google,” he explained. “Big and established. New York City is like Foursquare. Not as big but tons of hype. It’s going through a growth period and very exciting.”

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“Ongoing economic uncertainty has kept many limited partners and venture capital firms on the fundraising sidelines in 2010 and this hesitation is likely to continue for the remainder of the year,” NVCA President Mark Heesen said in a statement.

Certainly looks that way. Consider the chart below (click to enlarge).

Quite the downward trend, yeah? What is it that Sequoia Capital partner Michael Moritz often says? “The best time to invest is when people are cowering under their desks.” Hmm. Something like that…

The firm, founded by private-equity investor Alan Patricof in 2006 to invest in digital media startups, has raised a new $130.7 million fund following a $75 million fund in 2006. Rounding up the cash for the new fund wasn’t an easy process, however.

Ian Sigalow, a partner at Greycroft, says the firm started raising money more than a year ago in March 2009. In total, the firm had 160 first meetings with potential investors and dealt with many months where no investors committed, he says. “The first quarter of 2009 was miserable,” Mr. Sigalow says, recalling the deep-freeze that followed the stock market meltdown in late 2008. “It was cold. (Some investors) were saying why would we invest in a new fund?”

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Their presence is sorely missed. Consider this: Ten-year returns slid to 8.4 percent in the third quarter from 40.2 percent a year ago.

That’s a significant fall–no, it’s a horrific fall. And it’s only going to get worse, as the dotcompost that’s been nourishing the Venture Capital Index leaches out once and for all and the effects of the IPO drought that the industry has been suffering through these past few years begin to be truly felt.

“It has taken a full decade after the technology bubble burst for the venture industry to fully realize the impact of that era and its aftermath,” NVCA president Mark Heesen said in a surprisingly candid statement. “The significant returns created by the robust exit markets of the late 1990s have carried the industry for a long period of time.”

No longer. “The new reality is much more somber for many venture firms,” Heesen continued. “There are still healthy returns to be made in venture capital, but until the venture community sees a more vibrant exit market we do not expect marked improvement overall.”

[Image Credit: Audiophile & Synergy Industries]

In 2009, venture capitalists invested $17.7 billion–37 percent less than in 2008 (see chart below; click to enlarge). And they funneled that money into just 2,795 start-ups–37 percent fewer than the year prior. The sectors where these declines hit hardest: Software, clean tech and biotech.

“The venture capital industry had no choice but to slow the investment pace in 2009,” NVCA president Mark Heesen said in a statement. “The weak exit environment resulting from an unstable public market combined with a challenged limited partner base sent a strong message to the venture community to pull back the reins–and the VC’s listened.”

While the market for VC investments in 2010 is likely to remain tight, the situation is improving. Said Heesen: “Now that the economy has begun to show signs of improvement, we expect to see dollars flow more freely back into those sectors that offered the most promise before the recession began–clean technology, life sciences and IT. The seed and early stage pipeline needs replenishing across all industries and the health of the startup community in the next decade will be dependent upon more robust first-time financings. 2010 should be the year to begin that process in earnest.”

That was the task set by the National Venture Capital Association and job board StartUpHire, which asked for Twitter-esque submissions from start-up employees in celebration of Global Entrepreneurship Week.

You can find more than 100 of them here, and submit your own. Many of them aim to be funny, some inspire, though quite a few are simply advertising their start-ups or didn’t seem to understand the objective. Here are a few of our favorites. (Post yours at the aforementioned link, and if it’s interesting enough, we’ll add it below.)

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That’s somewhat evident from the new survey, “A Seat at the Table,” which canvassed more than 500 VCs and CEOs at venture-backed companies and asked them several questions about their thoughts on boards. While the results of that survey (see our coverage here)–conducted by the National Venture Capital Association and our venture-capital research arm, VentureSource–show that most CEOs are happy with their venture-capital board members, an open-ended question at the end invited respondents to shed any additional insight…and of the 50-plus comments (mostly anonymous) that came through, a large share touched on this same theme: VCs without operational experience–you know, the investment banker types–add little value on the board.

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Seems a paucity of IPOs and lackluster returns on investment have caused VC money to dry up. This does not bode well for an industry in what NVCA President Mark Heesen likes to refer to as a “Darwinian contraction”; “You are going to see a reduction in the number of firms, but more important you will see a reduction in the number of venture capital professionals,” Heesen told Reuters.

Looks like he was right.

LogMeIn became the fourth venture-backed IPO of 2009 this morning, hitting the markets with an offering that raised $107 million for the remote-services technology provider. Priced at $16 each, the high end of the stock’s IPO price range, LogMeIn (LOGM) shares spiked more than 30 percent to $20.90 shortly after the company made its public debut.

Great news for LogMeIn, which filed to go public in January 2008, only to see its prospects for doing so trashed by the econalypse. Great news as well for venture-backed companies hoping to go public. “The IPO window has cracked open a bit,’’ Emily Mendell, vice president of strategic affairs for the National Venture Capital Association told the Boston Globe. “I think the market has become slightly more stable.’’

It would certainly appear that way. Shares of SolarWinds (SWI), a network-management software outfit, are up 24 percent since their debut, and online restaurant-reservation service OpenTable’s (OPEN) shares have soared 52 percent since they began trading in May.

Clearly, we’re seeing something of an awakening in the moribund IPO market, although whether it will continue is anyone’s guess. “I think this is a temporary market window,” David Liu, a managing director at Jefferies & Co., told Forbes. “The economy is still screwed up….We’re telling our clients, if you can get on file and do something quickly, go ahead and do it now so you’re not caught flat-footed.”

Until then, the market will have to make due with merger-and-acquisition deals, which themselves aren’t doing so well. There were just 68 M&As in the first quarter of 2009, the lowest number since 1999. And they generated just $3.2 billion–down 65 percent from a year ago. Seems acquiring companies are on the lookout for bargain-basement deals and there are unquestionably few to be had given the souring economy. “Acquiring companies are simply looking to be very aggressive buyers and frankly are looking for rock-bottom pricing because that’s what they should be doing in this kind of environment,” Jim Watson, managing general partner at CMEA Capital, told VentureWire. “If you’re a seller now it’s because you have to be a seller.”

According to data released today by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Financial, VC investment in New Mexico is up an astonishing 375% from a decade ago, the number of start-ups up 600 percent. Equally as impressive is Pittsburgh, where VC investment is up 513 percent and the number of start-ups is up 267 percent.

Whoa.

As Mark Heesen, president of the NVCA, notes, New Mexico and Pittsburgh are clearly becoming hotbeds of innovation. “For regions that don’t have a large, indigenous venture investor base, it is important to give outside VCs a reason to visit,” he said in a statement. “These unexpected regions are making venture capitalists stand up and take notice.”

They sure are. New Mexico had three start-ups a decade ago. Now it has 21. 21! With new companies springing up willy-nilly like that, how’s a VC not to stand up and take notice?