Venture Funds Picky in Q2, Warming to Biotech-Survey
Washington Post/Reuters
Monday, July 2, 2001; 9:06 PM
SAN FRANCISCO—The number and value of venture capital deals plunged more than 50 percent in the second quarter from a year earlier as early-stage investors continued to reel from losses from technology start-ups, according to a survey released Monday.
A total of 737 private companies in the second quarter raised $8.9 billion in venture funding, a sharp drop from a year earlier, according to VentureWire, a service which tracks deals.
For the first half of the year, there were 1,679 venture deals valued at $21.8 billion, compared with 3,554 deals worth $52.9 billion in 2000, VentureWire said.
Among individual sectors, biotechnology posted the greatest increase in funding, jumping to $977 million in second-quarter 2001 from $545 million in 2000.
By contrast, electronic-commerce companies fared poorly during the second-quarter, with funding dropping to roughly a tenth of prior year levels, the survey said.
Business-to-business e-commerce companies saw their funding drop to $235 million in the second quarter from $2.5 billion a year earlier. Business-to-consumer companies had their funding contract to $148 million from $1.4 billion, VentureWire said.
The venture industry has been predicting a steep drop in funding for months, stressing that financiers have turned extremely cautious after the huge surge in deals last year.
Funding for portfolio companies jumped 74 percent last year to $103.5 billion from $59.4 billion in 1998, according to the National Venture Capital Association.
The rush of venture money helped back a large number of wobbly private companies, some of which are now failing, with the Internet sector proving an especially nasty source of pain.
Since January more than 550 Web start-ups have shut down, 10 times more than over the same period in 2000, according to a separate report by Webmergers.com, an online hub for buying and selling Internet companies.
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