Venture Capital Investment In Q2 2002 Continues Slide To Pre-Bubble 1998
Venture capital investment continued downward in the second quarter of 2002 as total disbursements fell to $5.7 billion, an 11 per cent decrease from the previous quarter, and the lowest level since the third quarter of 1998, according to the PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree(TM) Survey. A total of 819 companies received funding - essentially the same as 826 companies in the previous quarter.
Tracy Lefteroff, global managing partner of the venture capital practice of PricewaterhouseCoopers observed, "As expected, total investments for the year 2002 will be well below 1999, the first of the 'bubble' years. However, 2002 is still likely to be the fourth largest year ever for venture investing. This return to more normal historical levels also reflects the uncertain economic environment, the weak IPO market and more realistic company valuations. On the other hand, the fact that the number of companies getting venture backing has scarcely decreased is a positive indicator of future activity. Entrepreneurs are continuing to fill the pipeline."
Mark Heesen, President of the National Venture Capital Association said: "Successful venture capital investing in these uncertain economic times requires balancing the reality of the 'here and now' with the promise of the long-term horizon. VCs today must be able to continue to preserve capital and support their existing companies that are weathering the storm. Yet, they must also be in a position to keep their 'eyes on the prize' and find the new companies that will be the winners five to seven years from now. History tells us that some of tomorrow's most successful companies will be funded during today's down cycle. Patience continues to be required by all parties involved."
Life Sciences
Most industry trends evidenced in the first quarter continued in the second. The notable exceptions were in the Life Sciences -- Biotechnology and Medical Devices. The Biotechnology industry, which captured the second highest dollar amount at $958 million realised a strong 15 per cent increase in dollars invested compared with the first quarter figure of $836 million. The Medical Devices sector also showed significant growth with investment totaling $556 million, a 43 percent increase over the first quarter. Taken together, the Life Sciences industries accounted for 27 percent of all venture capital investing, the highest allocation in the last five years.
MoneyTree Survey results are available online at www.pwcmoneytree.com
www.ventureeconomics.com
www.nvca.org
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