Venture spending plummets
Bloomberg News Service
NEW YORK — U.S. venture capital investments fell more than two-thirds in the second quarter from the all-time quarterly high a year earlier, as the slide in U.S. stocks discouraged new spending, according to VentureWire, an information service.
Investments plunged from $27.9 billion last year to $8.9 billion, a 68 percent drop, while the number of companies funded fell from 1,898 to 737.
In the first half, 1,679 companies raised $21.8 billion, down 59 percent from the $52.9 billion raised by 3,554 companies a year earlier. The figures are still ahead of 1999's first-half pace, when 1,362 private companies raised $11.7 billion.
"Venture funds still have record amounts under management; the question is how much will go into new companies versus existing companies" that need to raise more private money, said Tom Simpson, managing partner of Northwest Venture Associates. "A lot of funds are reserving (for existing investments) and are skeptical of funding new businesses."
Even with the first-half decline, investing for the year as a whole is on track to reach almost 3,200 deals and $35 billion, Ken Andersen, editor of VentureWire, said.
One bright spot in the quarter was biotechnology, where investment rose 150 percent from a year earlier, VentureWire said. Information technology companies continued to be hit hardest, while business software and telecommunications services were about the same as a year earlier.
"Biotech and energy are the two sectors where there have been a few IPOs," Simpson said. "Venture firms tend to make private investments in sectors that are hot in the public markets."
Simpson said the shakeout probably will continue through the middle of next year, noting that many companies have raised enough capital to survive until then. "Until all those companies have gotten out of business or raised new capital," the full extent of the market decline won't be seen, he said.
The survey's results are based on daily investment totals recorded by VentureWire, which monitors private equity across 13 industry segments and more than 40 regions.
