US venture investment slides

Equity investments in venture-backed companies in the US fell for the fifth quarter running to $8.2 billion in Q2 2001 compared to $10.4 billion in Q1 2001, according to the PricewaterhouseCoopers MoneyTree Survey.

This represents a decline of 21 per cent, albeit significantly less than the 41 per cent fall in the first quarter, suggesting that investment levels may be settling.

In the second quarter, 669 companies received funding, down from 752 in the first quarter, a decrease of 11 per cent.

Seed and series A commitments declined further from last quarter’s record low, attracting only 15 per cent of investment. Series B rounds of

funding also dropped, but later stage companies saw funding increase by

eight per cent from $2.6 billion to $2.8 billion. While more of these companies received funding, later stage financings were more modest than in the past with average deal size falling from $18 million in Q1 2000 to $12.6 million in Q2 2001.

In the life sciences and healthcare segments, deal flow was up with the amount invested growing six per cent to $1.3 billion. Much of the momentum is attributed to the biopharmaceuticals segment that attracted $502 million

of investment.

Unsurprisingly, Internet investments continued their downward spiral with funding dropping 28 per cent to $5.7 billion the lowest in two years.

All Internet sub-sectors were down. Most notable was Internet infrastructure that fell 45 per cent to $1.3 billion, while Internet-related software investments put in the best performance, falling only eight per cent to $1.7 billion.