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Computer Software Wrap: Dotcom Woes Don’t Detract From Overall Disbursements

There may be too much money in the VC market right now, but it doesn?t seem to be having any trouble finding enough computer software deals.

According to our VentureXpert database, 100 computer software firms received a total of $1.418 billion worth of VC funding in September, up over $500 million from the same period last year.

That rise mirrors the overall VC spending spree which saw the first half alone hand out $30.3 billion as compared to $51.2 billion given out all of 1999.

“You have a lot of funds out there that have raised a large amount of capital and we?re seeing just as many opportunities,” said Mark Siegel, a managing director with Menlo Ventures. “I don?t think the deal flow has slowed down at all. We?re still seeing plenty of interesting Internet infrastructure, business process, automation, supply chain and e-commerce opportunities. So there are plenty of opportunities and plenty of money floating around. It?s a very good environment for software companies to go raise venture money.”

Leading the charge last month in the software sector was Netdecisions Holdings Ltd., a London-based firm that provides online application and development services for businesses. More specifically, the company develops complex digital solutions that integrate business strategy definition, customer experience definition and technical solutions integration through to deployment and configuration.

Corporate investor Marconi Ventures provided the funding in a Euro-based transaction worth approximately US$86.60 million.

Other big winners in the space included Nishan Systems Inc. and NonStop Solutions Inc., each of which netted $50 million.

Other Side of the Coin

Despite the sectors overall strength last month, people like Siegel do see some businesses being shut out of the funding frenzy ? especially within the b-to-c and b-to-b Internet market.

“There are investors with dotcom companies in their portfolios that are having trouble raising money. The public market downturn has lengthened the time to exit for portfolio companies and that has sucked up a lot of the investor?s time and leaving them with less time for new investments,” he said.

However, Siegel doesn?t think deal flow will let up because of the amount of capital raised that still needs to be put to work. “My guess is that it is going to stay pretty constant and that we?re not going to see a slow down for a little while,” he said.