SAN DIEGO — Venture capital investment in the United States
fell for the third straight quarter, with early-stage deals
being hit hardest, according to figures released this week by
New York-based VentureWire Group.
bucked that trend, however. While there were only about a third
of the deals of a year ago, there was actually more money
invested in the first quarter of 2001 than the first quarter of
2000, according VentureWire.
the first quarter of 2001 saw 11 companies receiving a total of
$300 million, whereas in 2000 there were 29 venture fundings in
San Diego, but the total dollar amount was $239 million. The
difference, explains Ken Andersen, managing editor of
VentureWire Group, is the $100 million invested in PacketVideo
and the $54 million that went to Syrrx Inc.
addition, what are known as PIPEs (Private Investment in Public
Entity) are outpacing initial public offerings and secondary
funding markets for small-cap and mid-cap companies, according
to San Diego-based PlacementTracker.com, a division of
DirectPlacement.com Inc., an investment bank and data research
lists a half-dozen companies that raised $76.9 million through
the private placement of common stock. Biotechnology companies
scored the most funding, with La Jolla Pharmaceutical Co.
landing $35.3 million and Ligand Pharmaceuticals Inc. receiving
$24 million. Third on the list was Sorrento Networks Corp.,
which obtained $10 million through a combination of stock
placement and warrants.
a total of 1,051 private companies have raised $14.5 billion in
venture capital, down significantly from last year's first
quarter total of 1,855 companies raising $27.7 billion,
according to VentureWire. The number of investments was down at
all stages, but early-stage deals were hit hardest, falling by
nearly half to 327 from last year's first quarter mark of 656.
totals mark the third straight quarterly decline in U.S.
venture-capital investment. Investment totals have not declined
for three consecutive quarters in the U.S. since the period
following the October 1987 stock market crash, VentureWire says.
capitalists are not thinking about new investments," says
VentureWire's Andersen. "They are spending their time —
and money — on saving the companies in their portfolios."
quarter totals suggest venture capitalists will invest around
$47 billion in 2001, a total well off last year's sum of $108
billion, but 15 percent greater than 1999.
still running way ahead of the last sane year on record,"
adds Brian O'Connell, VentureWire publisher. "What these
numbers represent is a chastened but still healthy
results are based on daily investment totals recorded by
VentureWire and published in the VentureWire Index (VWIX), which
tracks overall private equity investment on a daily basis.
the first quarter, the VWIX fell 30 percent, reaching its
52-week low on March 21. In contrast, during the first quarter
of last year, the index rose 53 percent as the Internet boom
neared the top. Currently, the VWIX is at its lowest level since
the fall of 1999, officials say.
sectors were more resilient than others. The index for
networking hardware companies declined just 5 percent over the
quarter, and the wireless index actually rose 16 percent. By
contrast, the rate of investment in Internet services companies
declined 35 percent over the quarter. VentureWire's industry
indices track daily investment in private companies in seven
lackluster investment climate is fueling the PIPE market to a
degree. During the first quarter of 2001, a total of $2.2
billion was committed to public companies through the sale of
167 PIPE offerings nationwide, according to PlacementTracker.com.
this is much less than the almost $8 billion was committed to
public companies through the sale of 375 PIPE offerings during
the first quarter of 2000, PIPEs are still out-pacing the IPO
market, says Brian M. Overstreet, president and co-founder of
PlacementTracker.com parent DirectPlacement.com.
a dismal general market environment and a virtually non-existent
IPO and secondary market, the PIPE market once again emerged
during the first quarter as the leading provider of equity
capital for small-cap and mid-cap public companies,"
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