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VC Dollars Dry Up
Venture-capital investment in state companies declines by more than half
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Business New Haven
8/19/2002
By: BNH
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STAMFORD - Venture-backed companies in Connecticut raised less money in the second quarter of 2002 than in the previous three-month period, returning to levels last seen in the third quarter of 1997.
According to the PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree Survey, nine Connecticut companies received $34.8 million in venture capital funds between April 1 and June 30 of this year, comparable to the $34.4 million invested in the third quarter of 1997. Second quarter 2002 results were down from $80.2 million invested in 14 companies during the first quarter of 2002.
Said Owen Davis, PricewaterhouseCoopers' emerging technology company practice leader in Connecticut and Westchester County, N.Y., “After the leveling off we experienced in the second and third quarters of 2001, we have seen a downward trend in Connecticut investing since the fourth quarter of 2001. This parallels the current turmoil in our capital markets and reflects venture capitalists' focus on efficient utilization of their investment dollars.
Added Davis: “In the second quarter, we saw several strong investments in the state - an indication that investors are still confident in our marketplace and funding is still available to qualified businesses at reasonable valuations. Global Logistics Technologies, a Shelton based company that develops Internet-based transportation software, received $20.0 million. Other notable investments include Campus TeleVideo, a provider of satellite programming and data integration based in Greenwich, which received $5 million. And CYA Technologies, a Trumbull-based developer of application-aware business continuity software products, received $4.8 million.”
Nationally, venture capital investment continued downward in the second quarter as total disbursements fell to $5.7 billion, an 11-percent decrease from the previous quarter, and the lowest level since the third quarter of 1998. A total of 819 companies received funding - essentially the same number as 826 companies the previous quarter.
Explained Mark Heesen, president of the National Venture Capital Association: “Successful venture-capital investing in these uncertain economic times requires balancing the reality of the 'here and now' with the promise of the long-term horizon. VCs today must be able to continue to preserve capital and support their existing companies that are weathering the storm. Yet they must also be in a position to keep their 'eyes on the prize' and find the new companies that will be the winners five to seven years from now. History tells us that some of tomorrow's most successful companies will be funded during today's down cycle. Patience continues to be required by all parties involved.”
In the second quarter, the New England region (including Connecticut except Fairfield County) placed second nationally in number of deals and dollars invested among major regions. The Silicon Valley, Calif. region placed first in terms of deals and dollars invested, and New York Metro (including Fairfield County) placed fifth behind the Southeast and the Midwest regions. In the first quarter of 2002, the New York Metro region ranked third.
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