Venture capitalists pull back spending

USA Today

SAN FRANCISCO — Skittish venture capitalists are still holding tight to their wallets.

Their first-quarter investments in start-ups and other young companies were down more than 50 percent from a year ago — dramatically accelerating a trend that began in late 2000.

But despite the collapse of at least 435 dot-coms since January 2000, Internet ventures topped the list of new VC investments.

"The death of the Internet has been greatly exaggerated," says Jesse Reyes, vice president of research firm Venture Economics.

In reports out yesterday:

• Investment falls. VCs, who invest on behalf of individuals and institutions, pumped $11.7 billion into 1,072 companies during the first quarter. That was down 56 percent from $26.7 billion in 1,751 companies in the same period last year, according to Venture Economics and the National Venture Capital Association trade group.

Virtually all industries saw a drop, according to a separate report from PricewaterhouseCoopers and VentureOne. Only the industrial sector, which includes agriculture, showed an increase — to $113.5 million from $59.6 million last year.

• E-commerce attracts. In a boost for the Internet consumer market, online spending is expected to reach $65 billion by the end of 2001 — up 45 percent from 2000, says a Shop.org study conducted by Boston Consulting Group.

USA Today's e-retail stock index is up 58 percent this year, but is still 67 percent off its November 1999 high.