Venture capital investment continued to slide in the Washington region in the second quarter of 2003, even as it rebounded nationally, according to a quarterly survey of venture investments.
Forty-five deals worth $183 million were reported regionally in the quarter ended June 30, a 23 percent decline from the previous quarter, according to the MoneyTree Survey conducted by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.
Nationally, 669 companies collected $4.3 billion from venture capitalists, up marginally from the $4 billion spent on 647 companies in the first quarter, the survey found.
The average regional deal was $4 million, compared with the national average of $6.4 million.
“Over the quarter we saw continued investment in companies founded in 1999 and 2000 but which are now having a tough time,” said John S. Taylor, the NVCA’s vice president for research. “And [there is] some renewed interest in very new companies. But there’s been a dramatic decrease in deal size.”
When venture capital investments peaked in the first quarter of 2000, $28.6 billion was invested in 2,164 companies nationally, Taylor said. The average deal then was worth $13.1 million. The total amount of investment reported in the survey has declined every quarter since, until the most recent quarter.
“There is some reason for cautious optimism,” said Jonathan M. Silver, a managing director at D.C.-based Core Capital Partners. But, he warned that the double-digit losses that investors have suffered in the past few years may persist.
“We probably need a few more quarters to draw any conclusions,” said Todd Dagres, a general partner at Massachusetts-based Battery Ventures. “But we’ve changed from pessimistic to optimistic within the venture capital community. We’re seeing a lot better deal flow. Entrepreneurs are coming up out of the weeds and deciding that now is not a bad time to start a company.”
Investment in software, traditionally the dominant sector in venture investing, led the quarter, with $864 million invested in 179 companies nationally, an increase of 7 percent over the previous quarter. In the Washington region, 18 area firms won $50 million during the quarter, a 58 percent decline from the first quarter.
Software investment is going largely to firms that were funded when the stock market was significantly higher but are now struggling amid low spending on information technology, Taylor said.
“These are good companies, good people and good technology,” Taylor said. “A lot of these dollars are now going into trying to generate sales on the hopes that IT will be coming back in the next few quarters.”
Telecommunications investing increased by 21 percent nationally to $615 million among 70 companies, most of them mature firms. Telecommunications investing was tops in the D.C. region, where six deals totaling $72 million were put together.
After hitting an eight-year low in the first quarter of 2003, the number of companies attracting venture capital for the first time increased to 153, from 138 in the first quarter. But it’s still easier for later-stage companies to attract capital than start-ups, the survey showed.
Nationally, venture capital analysts estimate there is still about $70 million to $80 million of funds committed to venture capital investments but not yet invested in companies.
Reported By TechNews.com, http://www.TechNews.com
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