$105 Billion Served

Despite late downturn, venture capital tops $100 billion for the year

NEW YORK  (BUSINESS WIRE)  Dec. 22, 2000  Private companies raised $105 billion in venture capital in 2000, more than double the $41 billion invested in 1999. This new record came despite a marked slowdown in venture capital investments in the second half of the year. Private companies raised approximately $18 billion in the fourth quarter, the smallest quarterly total in a year. These were among the preliminary figures released today by VentureWire, an online information service covering high-technology startups and venture capital investing.

Overall in 2000, venture investments have been declining steadily since mid-year. The VentureWire Index, which tracks daily venture capital investment, has lost 35 percent since July 1. In June, venture capitalists were investing upwards of $350 million per day in private startups. In December, that figure has fallen to below $250 million per day. This is still well ahead of the pace of last year. For example, in June 1999, private companies raised about $80 million per day and in December 1999 that figure increased to about $200 million per day.

To reach $100 billion invested in one year is quite an accomplishment. That's more than the previous 15 years combined, said Ken Andersen, managing editor of the VentureWire Group at Technologic Partners, which publishes VentureWire. But the pace has clearly slowed as venture capitalists pulled back as the year closed. The fourth quarter is historically the most active period of the year for investments, but in 2000 it was the smallest. Next year will likely see the first yearly decrease in venture capital investments since 1993.

The large-scale retreat from e-commerce companies was responsible for most of the second-half decline. Business-to-consumer Internet companies raised $3.9 billion in the first half of the year. That total fell to $1.6 billion in the second half. B2B companies were similarly struck. After raising $5.1 billion in the first half, investments tailed off to $3.6 billion in the second half.

Other sectors remained strong throughout the year. Investments in computer networking hardware, including optical communications equipment, reached $13.3 billion for the year. And investments in wireless applications and services, including mobile commerce, or m-commerce, companies, topped $4.4 billion for the year.

Companies based in Silicon Valley and San Francisco received by far the most investments, a total of $24.5 billion. New York City was a distant second with $5.6 billion and companies in the Boston area were third with $5.1 billion raised.

Intel was the most active venture capital investor in 2000. Through its various affiliated funds, the company made 210 investments this year. Goldman Sachs Group (145), Chase Capital Partners (142), Bessemer Venture Partners (130) and New Enterprise Associates (128) round out the top five.

These figures were compiled from the VentureWire database, which draws from the daily VentureWire newsletter as well as a quarterly survey of venture capitalists. The survey for the fourth quarter will be completed in early February of next year, and final data for 2000 will be released at that time.