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US venture capital slows down

NVCA: "The industry is catching its breath". Even so, deal flow remains healthy, VC's are still well-funded, and new funds are being raised.

Research from the National Venture Capital Association (NVCA) and Venture Economics shows a slowdown in US venture capital investment in the fourth quarter of 2000.

Venture Capital investment in the US reached record levels in 2000 – $103bn was invested compared to $59.4bn in 1999 – but slowed in the fourth quarter. $19.6bn was deployed in Q4 compared to $28.3bn in Q3.

Mark G Heeson, president of the NVCA, said: “The venture industry achieved record levels in 2000, but after five years of exceptional and unprecedented growth, evidenced by a ten fold increase in investments made, the industry is catching its breath. That said, venture capitalists are still raising new money, many have sufficient capital in their coffers and deal flow remains at healthy levels.”

The report continued to say that it believed that venture capitalists will continue to invest in the internet. “Although many in the business world have declared internet investing dead, data shows that the internet will continue to have a dramatic impact on the way people live and work in the future.”

Communications, computer software and services as well as semiconductors and other electronics all saw slight increases in terms of percentage of total dollars invested in Q4, compared to Q3.

Investors’ anxieties have taken their toll on first round financing. In Q4 23.4 per cent of companies that received funding were later stage companies, compared to 20 per cent for the full year. First round financings only accounted for 25.5 per cent of Q4 investments and 33.3 per cent for the year 2000, representing a slowdown. Early stage companies continued to attract a good proportion of venture capital – 22 per cent in Q4 and 23 per cent for the full year 2000.