Internet-Specific Wrap: Downward Trend for 2000 VC

Venture capital disbursements into Internet-specific companies began 2000 strongly but lost steam as the year progressed, according to preliminary numbers from our VentureXpert database.

Internet-specific companies — the VC market?s largest sector — received 44% of the money invested by VC?s in 2000 and comprised 45% of all companies receiving disbursements. Preliminary statistics indicate that at least 3,070 Internet-specific companies received $57.13 billion in 2000.

In January 2000, 291 companies received $4 billion, and those numbers continued to increase through March when 437 companies received $6.98 billion. The sector experienced a dip in April when only 305 companies shared $4.34 billion, but disbursements picked up in May with 405 companies receiving $5.4 billion.

June disbursements in the sector were almost identical to the May numbers, but funding gradually dropped off during the remaining months of 2000. In November, VCs disbursed only $2.18 billion into 152 companies, and preliminary December numbers hint that funding for that month will be at November?s level or lower. So far, analysts at Venture Economics have recorded VC disbursements into 87 companies totaling $1.53 billion for December.

However, the statistics from September severely bucked the theory of a second-half downturn. VCs invested in just 351 companies, but those investments totaled $7.98 billion. In September, companies received $22.7 million on average, approximately 19% higher than the annual funding average of $19.1 million.

For the year, VCs placed 44% of their disbursements into the Internet-specific sector, but by the end of the year that percentage had backed off. In November, only 30% of the funding favored the sector.

In May, Inc. received $291.5 million which early numbers show to be the largest Internet-specific disbursement. Other notables included two July deals which netted $235.5 million and $225 million for Netscalibur and Relera respectively.

In April, VCs invested $200 million into Brience Inc. The fourth quarter?s largest recorded deal involved Pihana Pacific Inc. In October, the company received $190 million which placed it among five of the largest VC deals for the year.

Some of the largest deals in the Internet-specific sector involved companies whose business was Internet communication technology and communication services. Companies from this report in the border between telecommunication and the Internet may have numbered less than 350 but may have accounted for as much as $20 billion of the Internet-specific sector?s disbursements.

Without those companies, the average disbursement for the sector would drop 12% to $16.3 million. An example of a company that might fall in this area would be Netscalibur or Carolina Broadband which was featured in yesterdays communications wrap.

Charles Fellers can be contacted at Story Feedback.