Posted on: Wednesday, May 16, 2001

Venture capital down 32% during first quarter

Associated Press

SAN FRANCISCO — In another sign of more cautious times, cash flowing to venture capitalists plunged 32 percent in the first quarter as skittish money managers continued to assess damage from earlier investments in high-tech start-ups.

Venture capitalists received $16.1 billion from pension funds, colleges and other institutional investors in the three months ended March 31, down from $23.8 billion in last year's final quarter, according to data released yesterday by the industry research group Venture Economics and the trade group National Venture Capital Association.

It marks the third consecutive quarter-to-quarter decline in venture capital fund-raising, signaling a reversal in the investment frenzy that helped turn unprofitable dot-com companies into business sensations during 1999 and the first half of 2000.

At the height of the Internet craze, institutional investors entrusted $107 billion to venture capitalists during the giddy 12-month period ending in September 2000, according to Venture Economics.

Although the investment deluge appears to be over, venture capitalists aren't exactly suffering a financial drought. The amount raised during the first quarter far surpasses the $15.6 billion that venture capitalists collected during all of 1997.