Drop-Off Eases in Venture Funding
Funding provided by venture capitalists for privately held companies may be stabilizing after a brutal year in which steep losses from scores of failed technology start-ups led venture firms to slash investment, according to a study released Monday.
Venture capital-backed companies received $6.3 billion in 610 funding rounds in the fourth quarter, compared with $6.6 billion in 629 deals in the third quarter, said research firm VentureOne Corp.
The fourth quarter’s funding decline was much less severe than in recent quarters: The third quarter’s $6.6 billion in funding compared with $8.6 billion in the second quarter and $10.6 billion in the first quarter.
Funding levels have dropped every quarter from a record $27 billion in the first quarter of 2000, VentureOne reported.
The “absence of multibillion-dollar declines in the fourth quarter suggests that we may have seen the bottom on the curve,” said San Francisco-based VentureOne.
The firm said it tracked 2,780 venture-capital financing deals worth a total of $32.1 billion last year, resulting in deal volume not quite half that of the 5,779 fundings in 2000 and an investment level about one-third of $91.6 billion in 2000.
Despite the sharp drops, venture-backed companies received more funds last year than in any year before 1999, VentureOne said, adding that venture investment is poised to pick up.
A forthcoming 2001 review by the National Venture Capital Assn. industry group, research firm Venture Economics and PricewaterhouseCoopers also is expected to signal recovery.
“It’s safe to say 2002 promises to be a better year, considering the very difficult economic environment in 2001,” NVCA spokeswoman Jeanne Metzger said.
