Posted on: Tuesday, October 15, 2002

Venture capitalists hit hard by tech slump

Associated Press

SAN FRANCISCO — Venture capital losses are deepening as the high-tech slump drags on, according to a report released yesterday.

Venture capital funds plunged an average of 27 percent for the year ending June 30, according to the study by Thomson Venture Economics for the National Venture Capital Association. That was down from an average loss of 23.8 percent for the year ending March 31, the study said.

After enjoying triple-digit investment returns during the late 1990s dot-com boom, venture capital firms have staggered in the tech meltdown. The industry has suffered losses for seven consecutive quarters.

The gains from the boom years are bolstering long-term returns, although those have been shrinking rapidly in recent quarters.

As of June 30, the industry's average three-year return stood at 5.5 percent, and the average five-year return was 10.9 percent.

Venture capitalists don't expect a reversal in the recent run of losses until the stock market rebounds and businesses begin spending on tech products again.