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Venture Investing Picks Up
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Business New Haven
2/18/2002
By:
Lisa Micali
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WASHINGTON, D.C. - Venture capitalists invested $7.1 billion in entrepreneurial enterprises in the fourth quarter of 2001, reversing a downward trend that began in the third quarter of 2000, according to the latest PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree Survey. These fourth quarter numbers suggest that the economic and psychological climate for venture investing is beginning to improve after 18 months of steady decline.
The survey also showed that despite an extremely difficult economic environment, $36.5 billion was invested in the 12 months of 2001, ranking the year as the venture capital industry's third best in terms of total dollars invested. The two sectors that showed the most strength in the fourth quarter were software and biotechnology. Also, life sciences categories (biotechnology, medical devices and equipment, health-care services) continued to capture a greater percentage of overall investment than seen in recent years.
Examining trends on an annual basis, biotechnology saw the largest gains in terms of percentage of investment, rising to 8.2 percent in 2001 from 3.5 percent in 2000. The increase can be attributed to the wide range of opportunities created by the integration of technology in the drug-development process and continuing advances in the genomics and proteomics fields. Conversely, retailing and distribution saw the biggest decrease in terms of a percentage basis, falling to ten percent in 2001 from 18.4 percent in 2000. This drop reflects the fallout that occurred in the e-retailing sector during the past 18 months. The software sector remained strong throughout 2000 and 2001, while several sectors held their own despite considerable uncertainty, including telecommunications and networking and equipment.
Study Higlights
• VC-funded firms now account for 7.6 million employees with annual revenues of $1.3 trillion. These figures represent: 5.9 percent of U.S. payroll; 13.1 percent of the nation's GDP and 7.9 percent of U.S. corporate revenue.
• For every dollar invested between 1970 and 1999, there was $9 in revenue during 2000.
• For every $21,627 of venture capital investment in 1970-1999, there was one job in the year 2000. That's not bad for an industry whose annual growth rate was less than one percent between 1970 and 1995 and 2.1 percent per year over past five years.
Connecticut Findings
• In 2000, Connecticut companies attracted capital from 24 states as well as the District of Columbia.
• 49 companies through September 2001 received some $433 million in VC funding.
• Acquisition has become the leading exit strategy, with $11.8 billion through September 2001.
• $1 billion in venture financing exceeds federal non-defense R&D budget of $3.8 billion in 2000 and 2001.
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