Venture capital (VC) in Minnesota nearly dried up in the first quarter, with only four local companies receiving investments, the worst performance in at least 14 years.

Minnesota companies attracted $56.1 million, down from $63.1 million in the fourth quarter of 2008, according to the MoneyTree report by PricewaterhouseCoopers and the National Venture Capital Association, based on data by Thomson Financial. That represented 1.9 percent of the national venture capital pool, about average for Minnesota. More than half of the money went to one start-up, Atritech Inc., of Plymouth.

The four companies -- two medical device start-ups, a green chemical maker and RedBrick Health, a health management firm -- represent Minnesota's lowest quarterly total of VC-financed companies since at least the third quarter of 1995, the earliest year in the MoneyTree report.

Minnesota's dismal showing mirrored that of the country as the nation's worst recession since the Great Depression scared away investors from all industries and all geographic regions.

VC investment fell 37 percent to $3 billion from $5.7 billion in the previous quarter. The number of deals dropped 37 percent to 549 deals compared to 866 deals in the last three months of 2008.

"It's no surprise," said Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers. "Given the economic turmoil that began in the third quarter of 2008 and continued on into 2009, it's not unexpected that the VCs would pause to assess the impact on their portfolio companies before again looking forward to their next investment."

The quarter saw double-digit decreases in every major sector.

National VC investment in medical devices, Minnesota's bread-and-butter industry, declined 27 percent to $412 million. The two medical device companies in Minnesota that won financing attracted $33.3 million, of which $30 million went to Atritech Inc. The Plymouth-based start-up is developing a device to treat atrial fibrillation, an abnormal quivering of the upper chambers of the heart that leads to irregular heartbeats.

Clean technology, the hottest industry in 2008, suffered the sharpest quarterly decline. VC investment plummeted 84 percent to $154 million. The drop was somewhat surprising given the recent passage of President Obama's stimulus package, which directed billions of dollars into developing renewable energy.

It's not entirely surprising, however, said Noubar Afeyan, managing partner and CEO of Flagship Ventures. The VC firm, based in Cambridge, Mass., specializes in biotechnology and clean tech. Investors had poured so much money into clean tech last year that VCs needed to pause to see how things shake out this year, he said.

"It's not just about rushing money into this sector," Afeyan said. "It's about trying to play at an appropriate time."

Despite the success of Rosetta Stone Inc.'s $112 million IPO Thursday, investors said it was still too early to declare an end to Wall Street's IPO drought.

"It's incrementally more positive, but not exaggerated euphoria," said Steve Harrick, general partner with Institutional Venture Partners in Menlo Park, Calif.

Thomas Lee • 612-673-7744