US venture capital funding hit a record $12.98 billion in the third quarter of this year, with $5 billion or 38 per cent going to Internet related start-ups.
According to a report by research firm, Venture Economics, and trade group, the National Venture Capital Association (NVCA), the money going to Internet companies was double the amount that went to such firms for the whole of 1998.
The study likewise indicated said the average round of financing per company had increased to $11.5 million this quarter from $7 million in 1998 and that the number of firms receiving $20 to $50 million had spiralled to 148 or the equivalent of $4.2 billion in total for the quarter. This compared with 119 during all of 1998 or the equivalent of $3.2 billion.
Steven Lazarus, chairman of the NVCA Research Committee, said many factors were converging to bring about this phenomenon. "A strong Internet sector, an active market for initial public offerings and an increasing number of entrepreneurs with promising ideas, top the list," he explained.
Computer software and services companies won $1.99 billion in venture capital in the third quarter, up 29 per cent from the previous quarter, while investment in the communications sector rose 16 per cent to $1.92 billion.
The study also showed that corporations and corporate sponsored venture capital organisations were starting to become more active. In the third quarter, they made investments of close to $2.13 billion compared with $1.03 billion for the whole of 1998.
Foreign investors also spent $400 million in the third quarter compared to $358 million during all of 1998.
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