Only $4.5 billion was invested by venture capital firms in start-ups during the third quarter of 2002, down 26% from the second quarter’s funding levels, representing the lowest levels of venture capital financing since 1988. The third quarter’s numbers are also down 85% from the $29.1 billion invested during the record setting second quarter of 2000.
Venture-backed acquisitions were hit equally hard. Seventy venture-backed companies were acquired for a total of $1.8 billion during the third quarter of 2002, down from 88 companies being acquired for $3.7 billion during the same period last year. In total, 647 venture financing deals were recorded in the third quarter, down from 838 made in the second quarter.
Additionally, only one venture-backed initial public offering (IPO) entered the market during the third quarter, medical devices and software maker HealtheTec, Inc., which raised $30 million.
Thomson Venture Economic and the National Venture Capital Association, who track IPO statistics, say this is the weakest quarter for IPOs since 1980, the first year IPO statistical data is available. By comparison, the first quarter of 2000 saw 76 separate venture-backed IPOs raise $8.3 billion.
The report says venture capital firms have been hit hard due to a slew of failed investments and companies are spending less on technology products, making it difficult for technology start-ups to generate sales and attract investors.