US VC investment falls by 18 per cent

Venture capital investment in the US fell by 18 percent in the fourth quarter of 2000, according to the Moneytree survey published by PricewaterhouseCoopers and VentureOne.

This is the third consecutive quarterly decline in VC investment in the US. The number of investments made in the quarter fell 9 per cent to 853; a total of $13.7bn was invested.

But despite the downturn, venture investment last year totalled $68.8bn, 80 per cent more than was invested in 1999 and nearly 11 times the total for 1995. The biggest fall in investments was in ecommerce, which experienced a 92 per cent drop on the previous year.

Unsurprisingly, internet deals have been the hardest hit. In the first quarter of last year, they were at the height of their popularity, and accounted for $16.6bn in investment. By the fourth quarter investment in the sector had fallen to $11bn. For all of 2000, internet investment totalled $56.9bn, according to the survey.

Tracy Lefteroff, global managing partner of the venture capital practice at PwC, said: “The mood has changed considerably. There is relatively little investment in new companies at the moment. Some venture capital groups are putting further funds into parts of their existing portfolio. But they are also looking for external sources of money for other groups, or just closing them down.”

Companies that provide business services, from web design to online financial clearing and settlement are still secure. This sector received about $24bn from venture backers last year, twice the previous year's total. Internet infrastructure companies, especially networking and high-speed data providers, received $11.3bn last year, or nearly triple the amount invested in 1999. Biopharmaceutical companies received $761.9m in investment, up 86 per cent year-on-year.