The amount of venture capital invested in Colorado companies increased sharply in the second quarter of 2003, thanks largely to one big – and previously announced – investment in WildBlueCommunications.

The $156 million WildBlue deal accounted for two-thirds of the approximately $229.5 million the venture capital invested in Colorado companies during the three months ended June 30, according to the quarterly PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Association Money-Tree survey.

Still, the $229.5 million investment in 18 companies marked the largest amount of venture capital funding for Colorado firms since the third quarter of 2001, when the state total was $360.5 million.

Funding for the second quarter also increased 49 percent over the $154.4 million invested in 15 Colorado companies in the first quarter of the year. It was also a 44 percent increase over the $159.1 million invested in 28 Colorado companies in the same quarter last year.

Telecommunications companies snagged the bulk of the money – due mostly to the WildBlue investment – followed by firms in the software and industry/energy sectors.

Venture capital funding is still far from what it was during the height of the economic boom – Colorado firms received $1.2 billion in funding three years ago, in the second quarter of 2000. But the fact that funding levels have risen over the past three quarters could offer a glimmer of hope for the long-beleaguered sector.

“The signs are encouraging,” said Matt Kosmicki of PricewaterhouseCoopers in Denver. But, he cautioned, “I don’t think we have enough information to say that this is definitely a reversing trend.”

A better test of whether the venture capital segment is rebounding will come in the next six months, Kosmicki said, when companies get a sense of whether the market is improving for initial public offerings. For venture capital companies, IPOs are often seen as the ultimate payoff of their investments.

The MoneyTree survey said venture capital funding also increased nationwide during the second quarter. A total of 669 companies received nearly $4.3 billion during the quarter, the survey said, compared with $4 billion in funding for 647 companies during the first quarter of the year. However, the national funding levels were lower than in the year-ago period, when 826 companies received nearly $6 billion in funding.

The deal with WildBlue, a Greenwood Village-based telecommunications company, was announced in December 2002. But WildBlue spokesman Brad Greenwald said it took several months for the deal to clear a regulatory hurdle with the Federal Communications Commission. It officially closed in April.

WildBlue’s backers included Liberty Satellite & Technology and Kleiner Perkins Caufield & Byers. Greenwald said the company, which has received about $400 million in three major rounds of funding, will use the latest investment to finalize plans to offer broadband service to individuals and small companies.

The state’s certified capital companies, or CAPCOS, provided $250,000 in venture-capital funding in the quarter, based on the MoneyTree data, industry information and records at the state’s Office of Economic Development. Advantage Capital put $150,000 and Murphree Colorado CAPCO put $100,000 into a $3.5 million late-stage round for Anark Corp., a Boulder digital-media company.

The CAPCO program is coming under fire as a “raw deal for the taxpayers,” in the words of Robert Lee, director of the state’s Office of Economic Development. The CAPCO industry counters that critics are misinterpreting the legislation and are throwing roadblocks in front of an important source of venture capital.

INFOBOX (1)

Venture capital grows in Colorado

First-quarter 2003 saw Colorado venture capital investments improve, but local and national markets remained week.

Colorado

……….. AMOUNT INVESTED … NUMBER OF DEALS

Q2 2002 … $159 million …… 28

Q2 2003 … $230 million …… 18

INFOBOX (2)

Venture capital grows in Colorado

First-quarter 2003 saw Colorado venture capital investments improve, but local and national markets remained week.

U.S.

……….. AMOUNT INVESTED … NUMBER OF DEALS

Q2 2002 … $5.98 billion ….. 826

Q2 2003 … $4.28 billion ….. 669

Source: PriceWaterhouseCoopers / National Venture Capital Association, MoneyTree Survey