Administration May 7, 2001

Investment Climate Clobbers Corporate VC Fund Flow

July 5, 2001 (PLANSPONSOR.com) - Corporate investment in venture capital investments plunged 81% in the first quarter, a victim of a shaky market, recession concerns, uninspiring valuations, a dearth in IPOs and a tech bubble bust, according to a new report.
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While investments by traditional, stand-alone venture funds fell by 39%, corporate venture capital spending peaked at $5.7 billion in 340 companies last year, from $361 million in 59 companies in 1995, according to figures from PricewaterhouseCoopers cited by the Wall Street Journal.

Scaling Down

Among corporations cutting back on their VC investments are:

  • Intel , which invested in Internet sites eToys and Quokka Sports, both of which have folded, in addition to losing money on Digital Entertainment Network.com and NBCi,
  • Dell , which backed Digital Entertainment and All.com, which have since failed,
  • American International Group’s SunAmerica annuities unit
  • AT&T , and
  • Cisco

While other companies like Exxon, BellSouth, Digital Equipment Corporation and US West Inc, have closed down their in-house venture capital operations completely.

Some attribute the failure of corporations in the venture capital sphere to their tendency to dive into the market too late. Further, there is often a conflict about whether investments should be made for strategic or financial goals.

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