Apr. 29–Venture capital investment in San Diego County has hit its worst slump in six years, with only $121 million making its way to privately held startup companies in the first quarter.<\/p>\n
A study being released today says the grim climate for new financing was evident in the national statistics as well, as investment in early-stage U.S. companies fell to $3.8 billion.<\/p>\n
That was the lowest level since the third quarter of 1997, according to the survey by PricewaterhouseCoopers, Venture Economics and the National Venture Capital Association.<\/p>\n
Venture capital experts attributed the slide to an ailing economy, war fears and the lack of appetite on Wall Street for initial public offerings a traditional way for venture capitalists to cash out on their investments.<\/p>\n
“The reality is that venture capital will not lead the economy out of this slump,” said Jim Ingraham, a partner with PricewaterhouseCoopers’ San Diego office. “It will follow out.”<\/p>\n
In San Diego County, venture capital investment dropped 28 percent from the prior quarter’s total of $168 million, and 64 percent from the $334 million raised in the first quarter of 2002, according to the PricewaterhouseCoopers survey.<\/p>\n
Not since the first quarter of 1997, when local companies raised $74.8 million in venture backing, has investment been so low.<\/p>\n
But some venture capitalists caution that the current quarter appears unduly bleak because of comparisons to the venture capital investment frenzy of 2000 and 2001.<\/p>\n
“The Internet and the genomics revolution both transpired around the same time and got investors hyperbolically excited,” said Steve Tomlin, a partner in Avalon Ventures, a San Diego venture fund. “But when the returns on those technologies weren’t immediate, overexuberance turned to depression and then this trough of despair.<\/p>\n
“Ultimately, we’ve come out to some level of reality,” said Tomlin.<\/p>\n
Yet that reality is cold comfort to the cash-hungry companies now vying for venture capital backing.<\/p>\n
Only 21 San Diego companies received investments in the first quarter of 2003, including $26 million raised by Entropic Communications and $25 million raised by Acadia Pharmaceuticals, according to the PricewaterhouseCoopers survey.<\/p>\n
That compares with 27 deals made the previous quarter and 29 deals in the first quarter of 2002.<\/p>\n
San Diego’s ranking among national markets as a venture-capital magnet also deteriorated from 8th position in the fourth quarter to 10th position during the first quarter of 2003.<\/p>\n
Locally, the biotechnology and medical device industry lost significant ground, raising $53 million, or 43 percent of the total investments made in local start-ups in the first quarter.<\/p>\n
That compares with $78 million or 47 percent in the previous quarter, and $173 million or 52 percent of the funding raised in the first quarter of 2002.<\/p>\n
Another crucial high-tech industry in San Diego, telecommunications and networking equipment, brought in $28 million, or 23 percent, of the total funds invested during the quarter. That compares with $42 million, or 25 percent, invested in the prior quarter and $106 million, or 32 percent, funded in the first quarter of 2002.<\/p>\n
About $11 million, or 9 percent, of the total investment in the quarter went to software and computer companies.<\/p>\n
Nationally, investment in the first quarter was down 12 percent from the previous quarter and off 41 percent, or $2.6 billion, from the first quarter of 2002.<\/p>\n
A total of 623 companies received funding in the first three months of this year, a decrease of 103 deals, or 14 percent, from the previous quarter and 193 deals, or 24 percent, for the first quarter of 2002.<\/p>\n
A similar survey released yesterday by Ernst & Young and VentureOne also found venture investment in decline nationally. According to that survey, first-quarter investment dropped to $3.4 billion, down 21 percent from the previous quarter and 40 percent from the first quarter of 2002.<\/p>\n
Deal activity in January was almost “nonexistent,” the Ernst & Young survey noted, but the pace picked up in February and March. As with the previous quarter, most of the money about 72 percent went to late-stage, established companies as their venture capital backers tried to keep them afloat.<\/p>\n
—–<\/p>\n
To see more of The San Diego Union-Tribune, or to subscribe to the newspaper, go to http:\/\/www.uniontrib.com<\/p>\n
(c) 2003, The San Diego Union-Tribune. Distributed by Knight Ridder\/Tribune Business News.<\/p>\n","protected":false},"excerpt":{"rendered":"
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