Continuing a downward trend, the pace of Bay Area venture capital deals slowed during the first three months of 2017, dashing entrepreneurs’ hopes that it would be easier to raise money this year.

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After worst IPO year since recession, Silicon Valley hopes for brighter 2017 Fewer local startups scored venture capital funding in the first quarter of 2017 compared to the quarter before, according to the Venture Monitor report released Tuesday evening by PitchBook Data and the National Venture Capital Association.

The drop continues a year-long slowdown of the economic machine that powers Silicon Valley’s tech sector, leaving some startups resorting to layoffs and other cost-cutting measures to make ends meet. But analysts say they’d better get used to it — investment activity isn’t going to return to the highs the industry saw in 2014 and 2015 any time soon. Instead, they say, the lower numbers represent a new, more sustainable normal as investors become more selective.

“In 2017, we’re more disciplined,” said Nizar Tarhuni, a senior analyst at PitchBook. “The companies that are getting funded deserve that capital.”

Venture capitalists invested about $6.7 billion in the Bay Area, closing 386 deals in the first three months of the year. That’s down from $7.8 billion and 557 deals during the first quarter of last year, which was a drop from the first quarter of 2015, according to the report.

Abe Ankumah, co-founder and CEO of network analytics company Nyansa, felt the squeeze firsthand when he started talking to investors earlier this year about raising a series B round of financing. Investors are demanding more proof of a company’s success before they invest, Ankumah said, leading him to postpone Nyansa’s next round of fundraising until the company can boast stronger financials. Nyansa is more fortunate than some companies, he said, because it has enough cash on hand to wait.

“The bar is definitely higher,” Ankumah said.

Though startups closed fewer funding deals, the amount of money investors spent actually ticked up in the first quarter of this year compared to the quarter before — largely thanks to Airbnb raising $1 billion this year, and Instacart and online personal finance company SoFi each raising more than $400 million.

Smaller, early-stage startups suffered most in the slowdown. Nationwide, the number of angel and seed stage funding rounds — which generally mark a company’s first fundraising efforts — dropped 62 percent in the first quarter of 2017 compared with the first quarter of last year, according to the report.

Tarhuni said that’s because investors, no longer as consumed by the fear of missing out as they were in the frenzied investment climate of 2015, are rejecting young companies with half-baked ideas and lackluster business plans. That wasn’t always the case. Between 2010 and 2015, the number of early-stage deals jumped nearly 250 percent.

“There’s no way that the quality of those businesses warranted the amount of capital that was flowing into them,” Tarhuni said.

Analysts say even now there’s plenty of money in the system, waiting to be deployed. Last year, the venture capitalists themselves raked in a 10-year high of $41 billion from the pension funds, foundations, endowments and other limited partners (or LPs) that fund their investment vehicles.

In the Bay Area, VCs raised $4.9 billion in 27 funds during the first quarter of this year, up from $3.2 billion in 20 funds the quarter before.

J. Alberto Yépez, co-founder of San Mateo-based VC firm Trident Capital Cybersecurity, was pleasantly surprised by the enthusiasm his firm’s first cybersecurity-focused fund received. The partners had intended to raise up to $150 million, but there was so much interest that they ended up closing an oversubscribed fund of $300 million in January.

But for limited partners to continue to invest in venture capital firms, so that VC firms in turn can fund the startups that drive such a large part of Silicon Valley’s economy, the partners need to start getting some money back through initial public offerings or sales. Last year was a dismal year for IPOs — just 10 venture-backed companies in the Bay Area raised $1.1 billion, after 25 companies raised $3.4 billion the year before, according to PitchBook. Industry experts were hopeful activity would pick up in 2017, but the first quarter turned out to be slower than some expected, researchers wrote in the Venture Monitor report.

So far this year, San Francisco-based software company MuleSoft has been the only local company to price an IPO, raising $221 million last month. But there are a few companies in the pipeline, including San Francisco-based software startup Okta, which is expected to price an IPO later this week, and Palo Alto-based big-data startup Cloudera, which filed for a $200 million IPO on Friday.

“I think we’re beginning to see cautious optimism,” Yépez said, “because of where the public markets are and how the markets are responding.”