Funding continued to drop in the third quarter as venture capitalists (VCs) invested $7.7bn in 873 companies, a 31 per cent decline from the previous quarter and a 73 per cent decline from the $28.5bn a year ago.
Third-quarter 2001 investment levels are comparable to first-quarter 1999 levels, when $7.2bn was invested, according to Venture Economics and the National Venture Capital Association (NVCA).
"Although these are clearly difficult times for all business sectors, the venture industry will persevere," said Mark Heesen, NVCA president, adding that veterans in the industry recognise this downturn as part of the long-term VC cycle.
Despite tough economic conditions, VCs spent the majority of their time and capital resources on existing portfolio companies. About 81 per cent of total venture investment in the third quarter went to follow-on investments.
VCs are still finding new opportunities, the NVCA said, in sectors such as software, communications, internet infrastructure, medical/health and biotechnology.
Technology companies including Cisco Systems, Intel and Oracle accounted for 11.3 per cent of the total dollars given in the third quarter, according to the NVCA. In the second quarter, they accounted for 11.7 per cent of all VC funding.
Northern California continued to attract the largest portion of capital investment in the third quarter with 30.5 per cent of total volume and 26.8 per cent of all first-found financing.
The $6.2bn raised by 46 funds in the third quarter of this year represents a 37 per cent decline from the last quarter, when 78 funds raised $9.9bn, and a 78 per cent decline from a year ago when 126 funds raised $27.6bn.
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