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FOR IMMEDIATE RELEASE
Contacts:
Joshua Radler, Venture Economics, 973.353.7139
Monica McGlinchey, Venture Economics, 617.856.1355
John Taylor, NVCA 703-524-2549, ext. 17
or Channa Brooks, The Weiser Group 917-579-5955,
or George Zouvelos, The Weiser Group 917-613-3320
Venture Capital Investment Activity Returns to 1999 Levels
Overall Activity Healthy With Percentage of First-Time Investments Increasing in Q1
May 2, 2001, New York City, NY -- In line with the rest of the economy, venture capital investments slowed in the first quarter of 2001 to $11.7 billion, according to Venture Economics and the National Venture Capital Association (NVCA), who announced the results at the NVCA Annual Meeting in New York today. Despite the retrenchment in the industry, a greater percentage of first-time investments were made in the first quarter of this year-28.6% versus 26.6% in the fourth quarter of 2000--indicating the VC industry hasn't turned its back on new ideas.
"Finding great ideas is still the idea," stated Mark Heesen, President of the NVCA. "While venture firms are indeed focusing on nurturing existing portfolios, the industry is reviewing new opportunities and investing at a steady pace. In an economy as complex and diverse as ours, opportunity always abounds."
As technology company valuations continue to fall, the average venture investment per company last quarter fell to $10.9 million compared to $13.7 million in Q4 2000 and $15.9 million in Q3 2000. After experiencing an unusually high investment pace for the last year, the results of the first quarter seemed to track the activity levels of early 1999.
| Quarter |
No. of
Companies. |
Average Inv. ($M) |
Sum Inv. ($M) |
| Q4-98 |
1,035 |
$5.94 |
$6,150.68 |
| Q1-99 |
874 |
$13.59 |
$11,881.01 |
| Q2-99 |
1,201 |
$10.59 |
$12,712.68 |
| Q3-99 |
1,317 |
$10.63 |
$13,996.13 |
| Q4-99 |
1,609 |
$15.67 |
$25,220.36 |
| Q1-00 |
1,751 |
$15.24 |
$26,681.24 |
| Q2-00 |
1,863 |
$14.42 |
$26,868.00 |
| Q3-00 |
1,790 |
$15.92 |
$28,502.12 |
| Q4-00 |
1,495 |
$13.71 |
$20,499.00 |
| Q1-01 |
1,072 |
$10.94 |
$11,728.09 |
Venture Economics/National Venture Capital Association
"Coming off a period of record economic growth and an extraordinary investment environment, it is important to put today's reality into perspective. This economic period is not unlike others we have experienced over the last few decades," said John Taylor, NVCA's Vice President of Research. "Despite ups and downs, the venture capital business has always been about building strong companies and supporting great entrepreneurs. This process takes patience, lots of hard work and the right timing."
Industry
Venture capitalists continue to recognize the promise of the Internet with Internet Specific leading the pack in terms of industry sectors, capturing 34.9% of all investment and 28.7% of new investments. Computer Software & Services ranked second overall, representing a shift away from Communications & Media companies, which had consistently ranked second during past quarters.
| Industry |
No. of
Companies.
|
Average Inv. Per Company ($M)
|
Total Invested
($M)
|
Percent of Total
|
Internet Specific
|
394
|
$10.39
|
$4,093.50
|
34.9%
|
| Computer Software & Svs. |
217
|
$10.12
|
$2,196.86
|
18.7%
|
Communications & Media
|
122
|
$14.47
|
$1,765.50
|
15.1%
|
| Semiconductors/Electronics |
76
|
$18.01
|
$1,368.79
|
11.7%
|
Medical/Health
|
84
|
$10.06
|
$845.21
|
7.2%
|
Biotechnology
|
53
|
$9.87
|
$523.25
|
4.5%
|
Other Products
|
54
|
$6.92
|
$373.85
|
3.2%
|
Computer Hardware
|
34
|
$9.67
|
$328.93
|
2.8%
|
Industrial/Energy
|
17
|
$7.8
|
$132.61
|
1.1%
|
Consumer Related
|
21
|
$4.74
|
$99.60
|
.9%
|
Venture Economics/National Venture Capital Association
**Internet Specific is a very narrow definition of companies that would not exist without the Internet and that would not fit in any other industry sector category.
When looking at Internet-related investments, the E-commerce & Content category received the most investment with Communications/Infrastructure coming in a close second. "To take license with a famous quote, 'The death of the Internet has been greatly exaggerated'," says Jesse Reyes, Vice President, Venture Economics. "While it is true that VCs are no longer backing every Internet idea out there, they are continuing to invest in the future the Internet promises. However, they are doing this through selective investments rather than playing the speculative investment game that was so prevalent in the past couple of years. Remember that there is a long lead-time, often years, between the investment that a venture investor makes and the time that company is exited through IPO or acquisition. While it will be several quarters before we see the total effect the investing binge of 1999 and 2000 will bring, VCs continue to invest in technology and other high-growth potential industries, albeit at a slower pace."
Internet Category
|
No. of
Companies.
|
Average Inv. Per Company ($M)
|
Total Invested
($M)
|
Percent of Total
|
Non-Internet Related
|
382
|
$8.60
|
$3,283.94
|
28.0%
|
E-commerce and Content
|
317
|
$9.82
|
$3,113.79
|
26.6%
|
Communications/Infrastructure
|
139
|
$19.00
|
$2,641.22
|
22.5%
|
Internet Software and Tools
|
158
|
$11.05
|
$1,746.28
|
14.9%
|
Internet Services
|
47
|
$12.19
|
$573.09
|
4.8%
|
Internet Related Hardware
|
19
|
$10.85
|
$206.16
|
1.8%
|
Other Products
|
54
|
$6.92
|
$373.85
|
3.2%
|
Other Internet Related
|
10
|
$16.36
|
$163.62
|
1.4%
|
Venture Economics/National Venture Capital Association
**Internet-related describes companies that provide content, e-commerce, hardware or services to the Internet economy. Internet-related companies are found in all industry sectors.
Geography
California companies continue to attract the most venture capital investment. In the first quarter of 2001, New England was the second-most popular region, while New York was third. This represents a change from the first quarter of 2000, when New York ranked second and New England finished third.
| Region |
No. of Comp. |
Total Invested ($M) |
Percent of Total |
| N. California |
258 |
$3,685.80 |
31.4% |
| New England |
143 |
$1,585.62 |
13.5% |
| Greater New York |
139 |
$1,369.11 |
11.9% |
| S. California |
91 |
$1,103.27 |
9.4% |
| Southeast |
98 |
$845.37 |
7.2% |
| Southwest |
67 |
$783.50 |
6.7% |
| Mid-Atlantic |
68 |
$555.36 |
4.7% |
| Rocky Mountains |
35 |
$414.62 |
3.5% |
| Northwest |
47 |
$389.20 |
3.3% |
| Great Lakes |
44 |
$330.59 |
2.8% |
| Great Plains |
27 |
$274.72 |
2.3% |
| Ohio Valley |
38 |
$227.78 |
1.9% |
| South |
13 |
$69.09 |
.6% |
| Alaska/Hawaii |
1 |
$34 |
.3% |
Venture Economics/National Venture Capital Association
*More detailed regional statistics can be found on http://www.ventureeconomics.com/statshome.htm
Stage
Companies in the expansion stage of development continue to capture the most venture capital, capturing 48.7% of all dollars invested. Early Stage companies captured 27.7% and Later Stage companies captured 22.6%, respectively. When comparing these metrics to a year ago, later stage companies are now receiving a greater percentage of venture capital investment. This is to be expected considering a greater percentage of the total investment is going toward follow-on financings.
Company Stage
|
Percent of Total
|
Expansion
|
48.7%
|
Early Stage
|
27.7%
|
Later Stage
|
22.6%
|
Buyout/Acq.
|
.9%
|
Methodology:
Venture Economics and NVCA research results include venture capital led rounds of equity financing, which are verified as growth equity financings. Co-investment and subsequent investment by other equity financing sources are included in venture round totals. All data used in this release were compiled from statistical analysis on VentureXpert, a product of Venture Economics and the official NVCA database of venture capital activity. All data collected are subject to NVCA's Appropriate Use and Disclosure Policy. This policy allows VE & the NVCA to accurately count all venture capital activity whether or not the deal detail can be disclosed.
The National Venture Capital Association (NVCA) represents more than 450 venture capital and private equity firms. NVCA's mission is to foster the understanding of the importance of venture capital to the vitality of the U.S. and global economies, to stimulate the flow of equity capital to emerging growth companies by representing the public policy interests of the venture capital and private equity communities at all levels of government, to maintain high professional standards, facilitate networking opportunities and to provide research data and professional development for its members. For more information about NVCA, please visit www.nvca.org.
Venture Economics, a Thomson Financial company, is the foremost information provider for private equity professionals worldwide. Venture Economics offers an unparalleled range of products from directories to conferences, journals, newsletters, research reports, and the VentureXpert (tm) database. For over 35 years, Venture Economics has been tracking the venture capital and buyouts industry. Since 1961, it has been a recognized source for comprehensive analysis of investment activity and performance of the private equity industry. Venture Economics maintains long-standing relationships within the private equity investment community, in-depth industry knowledge and proprietary research techniques. Private equity managers and institutional investors alike consider Venture Economics information to be the industry standard. For more information about Venture Economics, please visit www.ventureeconomics.com.
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