The rumors of venture capital’s death have been greatly exaggerated, according to a new report about venture activity nationwide.
The quarterly MoneyTree Survey by accounting firm PricewaterhouseCoopers, Venture Economics and the National Venture Capital Association, shows $7.1 billion in VC financing was doled out in the fourth quarter of 2001, up from $7 billion in the third quarter.
Although the increase was a mere 1.4 percent, it marks the first quarterly growth in venture investing since the Internet bubble burst in the middle of 2000.
The report also shows that, despite the creaking economy and the after-effects of the Sept. 11 terrorist attacks, venture capitalists across the country invested a total of $36.5 billion last year, making 2001 the industry’s third best in terms of total dollars invested. The annual total was almost double the amount invested in 1998, when the frenzy over e-tailing and other Internet ventures began to balloon the sums sunk into fledgling firms.
“What everyone has been looking for is, ‘Where is the bottom?'” says Jeff Barber, who heads the Carolinas Technology Industry Group for PricewaterhouseCoopers from the firm’s Raleigh office. “I think we’ve finally bottomed out and have stabilized.”
Barber will present the regional numbers from the MoneyTree Survey at an invitation-only breakfast on Feb. 20 at the Sheraton Imperial. Also at the event, venture capitalists Mitch Mumma of Intersouth Partners in Durham and Richard Maclean of Frontier Capital in Charlotte will give their forecasts of the venture market in 2002.
Biotech firms drawing more interest
Software and biotechnology were the strongest sectors for venture investing during the fourth quarter, according to the national survey. Biotech firms captured 14 percent of all venture money during the three-month period, up from 10.1 percent in the previous quarter. Software companies jumped from 16.9 percent of total investments in the third quarter to 22.5 percent.
Venture capital firms also stuck close to home during the quarter, the survey shows. Almost two-thirds of the $7.1 billion invested during the quarter went to companies already in a VC portfolio, up from just over half of the total invested during the third quarter, as investors try to sustain their existing companies until the economy improves and exit strategies become more available.
Barber says it is too early to say whether the fourth-quarter results are just a blip or they mark the beginning of renewed investments. But he believes 2002 will be a much stronger year for venture investing than last year was.
“I think the VCs have dealt with their internal issues and are focused on new investing again,” he says.
For a copy of the national MoneyTree Survey, visit www.pwcmoneytree.com.