Venture Funding Growth Rate Slips

November 6, 2000 ( - For the first time in more than two years venture capital investment fell in the third quarter. Still, the $79.9 billion invested so far this year is 137% more than the comparable period a year ago according to the National Venture Capital Association.

During the third quarter of 2000, $25.9 billion was invested in 1,774 companies according to Venture Economics and the National Venture Capital Association.  That was slightly lower than the $27.8 billion and $27.8 billion recorded for the prior two quarters of 2000.

Of the third quarter totals, Internet related companies continued to attract a significant 44.55% of the funding, roughly the same as the 45.18% a year ago, despite a $4.4 billion drop-off in funding for the category.  On the other hand, communications companies drew 18% of the quarter’s funding, up 25.7% from the second quarter, and over 44% higher than a year ago.

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Lower returns and less demand for initial public offerings (IPOs) are reportedly contributing to the slackening level of investment.  Venture returns fell to 3.9% in the second quarter – lowest since 1991, while the $26 billion raised in IPOs during the quarter was the first time below $30 billion in a year.

– Nevin Adams