VC Investment Continues to Slow in Q3

October 30, 2001 ( - Venture capital investment and fundraising continued to slow in Q3, according to Venture Economics and the National Venture Capital Association (NVCA).

During the quarter, venture capitalists invested $7.7 billion in 873 companies – a 31% drop from the prior quarter and 73% lower than a year ago. However, that puts the level of current investment on par with Q1 1999.

Northern California continued to attract the largest portion of capital investment in the third quarter with 30.5% of total volume and 26.8% of all first-round financings. New England ranked second with 13%, and the Southwest region came in third with 9.5%.

However, for first-round financings, the New England region ranked second, and the New York Tri-State region ranked third.

Some $6.2 billion was raised by 46 funds in Q3 2001, a 37% decline from the prior quarter. Of those funds, half had an early-stage focus, with 68% of the cash raised.

During the first three quarters of 2001, venture capitalists raised $34 billion, putting this year on track to be the third-highest year for venture capital fundraising.

On a regional basis, the lion’s share of capital went to the New England area, where 11 funds drew $2.4 billion. Northern California also raised 11 funds, bringing in $1.1 billion, with the two regions combining for over half (57%) of the total.

– Nevin Adams