Q4 figures show hope for US

A survey of venture capital investments made last year in the US showed a slight increase in the number of deals and amount invested in the last quarter of the 2001. According to the PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree Survey this is the first quarter in 18 months to show an upturn. However, figures for the preceding three months were the lowest since the first quarter of 1999.

In the last quarter of 2001 venture capital investments in the US totaled 856 deals worth $7.1 billion. Tracey Lefteroff, global managing partner of the venture capital practice of PricewaterhouseCoopers, said: “The uptick in dollars and deals in the fourth quarter occurred despite economic disruption and uncertainty. And, calendar year 2001 investments were nearly double 1998, which was the last pre-bubble year. The stars have realigned along historical norms.” The investment total for the year was $36.5 billion, invested in 3,928 deals.

Software and biotechnology were the strongest sectors in Q4 2001, raising $1.6 billion and $1 billion, respectively. Over the year as a whole software companies raised a total of $6.8 billion, with the telecoms ($5.9 billion), networking and equipment ($5.5 billion), retailing and distribution ($3.6 billion), and biotechnology ($2.9 billion) sectors also doing well. Biotech saw the largest gain in terms of percentage of investment, rising from 3.5 per cent in 2000 to 8.2 per cent last year.

Jesse Reyes, vice president of Venture Economics, noted another trend: “What is really telling as to the industry’s new view of the world is that these initial investments are now averaging $7 million per company rather than the $10 million of the typical mid-2000 deal. This may be a reflection of valuation reality or simply a way to lower the risk exposure. In any event, VCs are more cautious.”

Total US investments in $ by Year 1997 – 2001

Year/ Amount Invested

1997 Q1/ 2,766,463,000

1997 Q2/ 3,946,806,300

1997 Q3/ 3,466,830,200

1997 Q4/ 4,170,262,900

1997 Total/ 14,350,362,400

1998 Q1/ 3,618,764,000

1998 Q2/ 5,244,558,900

1998 Q3/ 4,715,972,200

1998 Q4/ 5,597,962,500

1998 Total/ 19,177,257,600

1999 Q1/ 6,284,470,100

1999 Q2/ 10,504,585,500

1999 Q3/ 12,997,400,800

1999 Q4/ 22,668,591,700

1999 Total/ 52,455,048,100

2000 Q1/ 26,266,302,000

2000 Q2/ 26,342,354,900

2000 Q3/ 26,078,354,700

2000 Q4/ 20,939,371,100

2000 Total/ 99,626,382,700

2001 Q1/ 12,363,870,700

2001 Q2/ 10,031,613,300

2001 Q3/ 7,003,293,500

2001 Q4/ 7,138,012,000

2001 Total/ 36,536,789,500

Source: PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree? Survey