VC Investment Tapers Off – Again

February 8, 2001 (PLANSPONSOR.COM)- US venture capital investment continued to fall off in Q4, the third consecutive quarter of year-on-year declines according to a new study.

A new PricewaterhouseCoopers MoneyTree survey showed overall US venture capital investment dropped 18% during the last quarter of 2000. However, Internet investments continued to draw funds, with $56.9 billion out of a total of $68.8 billion in venture capital investment last year.

During the last quarter of the year, $13.7 billion was invested in products and services investment, including Internet e-commerce companies.

Internet-related investments fell as a proportion of the total for the third consecutive quarter, representing just 80% of the total. The number of internet-related transactions fell 11% while the amount raised decreased 19%.

Hardest hit were e-commerce companies, which collapsed 92% year-on-year.

The median amount invested in each transaction reached a record $12 million, against $11.5 million in the previous quarter. Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, said early stage investments were larger than usual, while later stage investments were smaller.

Bright Spots?

Overall, information technology investments fell 13%. Within this segment, semiconductor investment was “relatively stable,” the study found. Communications and network investments “barely fell,” while fiber-optics and photonics investments actually rose 9% year-on-year. “Telecoms and networking are still on fire,” said Lefteroff. The biggest bright spot was biopharmaceuticals, which raised $762 million, up 86% year-on-year.

Chuck Epstein