Internet-Specific Wrap: VCs Still Back New Economy

A quick look at preliminary third quarter VC disbursements results in the Internet-specific industry sector illustrates quite clearly that rumors of the New Economy?s demise are greatly exaggerated. While the rest of the country might be engaged in dotcom deathwatch, VCs remain busy looking for the next revolutionary Internet company.

According to our VentureXpert database, VCs during third quarter funded some 587 Internet-specific companies for a total of $8.11 billion. This works out to an average of approximately $13.82 million in funding per company, which is slightly ahead of the pace set in the second quarter when 893 companies shared $12.14 billion in funding for a per company average of $13.60 million.

The first quarter of 2000 remains the year?s leader in terms of both absolute numbers and average amounts, as 913 companies received a total of $13.43 billion in financing for a per company average of $14.72 million.

Analysts with Venture Economics said the third quarter totals should rise, as funding numbers become finalized.

As for the third quarter itself, September proved to be the most lucrative month to be an Internet-company looking for venture funding, as 183 companies averaged $14.71 million in financing. August saw 224 companies end up with an average $13.64 million in funding each, while July lagged behind, slightly, as 180 companies each receive an averaged $13.14 million in venture dollars.

While VC disbursements in third quarter may only seem to be keeping up with the investment pace of the first two quarters of 2000, preliminary third quarter disbursements figures are already ahead of 1999?s third quarter numbers. A year ago, VCs backed 532 companies in the third quarter for a total of $5.69 billion, or an average of $10.70 million per company.

Funding Honor Roll, an electronic b-to-b marketplace for companies in the computer, electronics and telecommunications industries, led the third quarter funding honor roll with a $200 million round of financing. A syndicate of investors, including IBM Corp., Lucent Technologies, Nortel Networks Corp. and Crosspoint Venture Partners, backed the company.

“This is not just another dotcom or buyer consortium where people come together to beat up on sellers,” said said John Mumford, founding partner of Crosspoint Venture Partners. “This is about using the net to collaborate on design and requirements.”

Headstrong, a consulting company focusing on e-business solutions and strategies, checking in at number two on the funding list with a $191 million venture round., another business-to-business online marketplace, rounded out the top three with a $150 million round.

Alistair Christopher can be contacted at Story Feedback