Market research group VentureOne said VC executives had a hard time executing initial public offerings and lost financial support from one-time institutional backers.
First Rounds Hard Hit
One effect of the cash crunch: VC groups are increasingly allocating funds to existing investments, making it more difficult for start-ups to raise capital, according to VentureOne.
The number of first-round investments tumbled 65% from
2,372 in 2000 to just 777 in 2001, while the amount put
into those first-round investments shrank 77% from $26
billion to $6 billion. Funding of second rounds fell 53% to
$10.8 billion, while later-stage funding dropped 55% to
Investment in products and services collapsed 80% from $26.6 billion to $5.3 billion year-on-year. Venture capital investment in retailers tumbled 88% to $245 million. In the final quarter, only $2.4 million was invested in such companies.
The information technology sector saw the amount invested tumble 61% from $55 billion to $21 billion.
Sub-sectors that were particularly badly hit included:
- information services, down 79 % to $1.9 billion
- communications and networking, down 64% at $8.4 billion
- software, down 59% to $7.3 billion.
Healthcare investment held up better, down just 36% at
$5.5 billion. Biopharmaceuticals fell 22% to $2.8 billion,
while medical devices were down a mere 15% at $1.6