Squint all you want. It's hard to find anything to cheer in the most recent round of venture capital data.

VC fundraising is down. The amount invested is down. The number of folks investing in venture capital is down. The number of VC firms and partners are down and down. Returns? Yes, still down.

This would be bad news no matter the timing. But the venture capital industry has been down for more than a decade, long enough and deep enough to make me wonder: Is venture capital in a down cycle or a death spiral?

The people I talked to in the industry sounded grim even as they tried to make the case for optimism. Still, it remains difficult to identify a clear path for turning things around for the battered venture capitalists who make Silicon Valley hum.

"We're unquestionably in a Darwinian environment right now," said Mark Heesen, president of the National Venture Capital Association.

Let's just review some of the numbers:

  • Venture capital firms invested $6.5 billion in 889 deals in the U.S. during the most recent quarter ending in September. That's down 11 percent in dollars, and down 5 percent in the number of deals, from the second quarter, according to the PwC/NVCA MoneyTree report based on data from Thomson Reuters. At that rate, the numbers for 2012 are expected to be below 2011.

  • The venture money being raised is going to fewer firms. In the second quarter, the NVCA reported that 80 percent of all venture money was raised by just five funds.

  • The number of venture firms has declined from more than 1,000 a decade ago to 462, according to the most recent NVCA numbers.

  • The number of limited partners -- the organizations and people who invest in VC funds -- is declining. Though no one seems to have firm numbers on this, it's a widely acknowledged problem in the industry.

    "Limited partners are getting fatigued from giving money to venture capital and getting back less than they give," said Tracy Lefteroff, global managing partner of the venture capital practice at PWC.

    Indeed, the sentiment among big limited partners is typical of the statements made in August by officials at CalPERS (California Public Employees' Retirement System). CalPERS has $2.1 billion in venture capital assets, about 6 percent of the $34 billion it invests in private equity. Under a new proposal, the pension fund might drop that to 1 percent, or $340 million.

    Joe Dear, CalPERS' chief investment officer, told Reuters: "Venture has been the most disappointing asset class over the past 10 years as far as returns. "

    So what's wrong with the VC industry? The problems are many and complex. But they can be boiled down to this: Not enough exits.

    For the size of venture capital being raised and invested, there simply aren't enough initial public offerings of stock to generate the returns that funds need. Compounding that: mergers and acquisitions are also way down this year. That's another way VC firms and their partners make money on their investments.

    Venture insiders blame the global economic uncertainty. They believe that is part of the reason that giant corporations, which have amassed huge piles of cash, are just sitting on it, rather then using it to acquire startups.

    "The numbers are way down," said Ray Rothrock, a partner at Venrock. "All these companies with these fantastic balance sheets, and nobody is really buying anything. With all the uncertainty they're facing with the economy and taxes, buying little companies is way down on their list. Liquidity is way off and that makes everyone grumpy."

    Still, Rothrock insists that the notion of doom and gloom hovering over his industry is overstated. He points out that as a whole, the venture industry is still raising and investing billions of dollars in entrepreneurs. And the void being left by independent venture firms is being filled in part by an explosion of corporate venture funds.

    Indeed, the NVCA now has 60 corporate venture members, up from just a handful a few years ago. Even as Rothrock and I were talking on Thursday, reports emerged that Google had increased the size of its venture fund from $200 million to $300 million.

    Rothrock is hopeful that if the federal government can strike a deal to avoid the so-called fiscal cliff, then mergers and IPOs could pick up again in the first quarter of 2013.

    "Having seen a number of these cycles, I believe venture capital will recover," Rothrock said. "I don't think we're through funding young companies with great ideas."

    Even if that happens, and it's still a big if, what emerges seems to be a smaller, more concentrated venture industry.

    "I don't think the industry is dying," Lefteroff said. "But it will certainly be smaller than what we saw in the last 10-15 years. It's headed back to where it was in the late '80s and early '90s. I think we will see venture returns return at some point.

    "In the short term, though, it will be a tough business."

    Contact Chris O'Brien at 415-298-0207 or cobrien@mercurynews.com. Follow him at https://twitter.com/obrien and read his blog posts at www.siliconbeat.com.