Venture capital, supposedly the lifeblood of American innovation, has developed thrombosis.

What's left of rich people, pension funds and endowments aren't investing in VC funds and VC funds, in turn, aren't putting money into start-ups.

The Dow Jones Venture Source says venture funding in IT was down 53% in Q1 to $1.7 billion, the lowest level since 1997 and the fewest deals since 1995.

IPOs, the great exist strategy, are history; there weren't any in Q1; and M&A deals, for all the talk of consolidation, are growing increasing rare; there were all of 56 of them en toto in Q1 worth a mere $645 million - practically a rounding error compared to the $4.5 billion buyouts generated a year ago, according to the National Venture Capital Association.

VC funds, or what's left of them, raised $4.3 billion in the first quarter, down 39% year-over-year. VC investments in Q4 were already down 33% year-over-year to $5.4 billion and down 26% sequentially.

The two biggest fund raisers in Q1 were August Capital ($650 million) and Bain Capital Ventures ($475 million).

Software remains the hottest IT proposition with 138 firms getting $614 million; that's down 56% in dollar terms and 45% in deals year-over-year. Internet investments came to $556 million down 58%.