Jul. 30–The bleeding may finally be stopping for battered venture capitalists.<\/p>\n
Venture financing for privately held companies in the Bay Area and the East Bay rose in the second quarter, compared with funding activity in the first quarter, according to a survey released Tuesday. Private companies also raised more venture money nationwide in the April-June period, a joint study by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association showed.<\/p>\n
Private companies in the Bay Area raised $1.44 billion in the second quarter, up 7 percent from the first quarter of this year but below the financing levels of the same period the year before.<\/p>\n
The East Bay rebounded more strongly. The $224 million raised in the April-June period was up 56 percent from the first quarter and 0.5 percent from the second quarter of 2002. The East Bay total also was the highest since the first quarter of 2002.<\/p>\n
“The trend is absolutely positive,” said Mark Pine, managing director in the San Ramon office of Sigma Partners, a venture firm. “Activity is higher. We’re seeing more companies getting funding. We’re seeing more second-round deals. Venture groups that were quiet are now back and investing in more deals.”<\/p>\n
Venture financing activity is an important piece of the Bay Area’s economic mosaic. Much of the region’s life blood depends on the creation of new, innovative companies that can become the next eBay Inc. or Intel Corp.<\/p>\n
But with the stock market and the economy in a funk, and the Bay Area mired in an outright recession, venture funding has become increasingly scarce. The possible stabilization in the Bay Area market would represent a welcome reversal of the steady erosion in the market after venture financing peaked in 2000.<\/p>\n
“The increase in dollars being committed to companies is a good sign,” said Matthew Bolton, an analyst with Redwood City-based Woodside Funds, a venture capital firm.<\/p>\n
But that doesn’t necessarily mean venture money will flood the market and unleash a torrent of new high-tech companies, the way it did in the late 1990s.<\/p>\n
“Does the improvement mean we’ve seen the bottom and we’re going up from here? It’s too early to make that prediction,” Bolton said. “But activity has definitely shown an uptick. Things are starting to pick up. The future is brighter today than it was a few quarters ago.”<\/p>\n
Wall Street’s resurgence and the unexpected resurrection of the market for new public companies are the two primary propellants behind the brighter prospects for private venture financing.<\/p>\n
The initial public offerings sector has enjoyed an increase in the number of companies going public and rising stock prices for a company once it’s launched an IPO. A successful IPO is a typical way for shareholders to recoup their investment in a privately held company, so a strong public offerings market can make venture funding more attractive.<\/p>\n
The rebound began with the stock sale for Livermore-based FormFactor Inc., a semiconductor tools company that raised $84 million through its IPO in June. FormFactor’s shares as of Tuesday had jumped 33 percent. FormFactor’s IPO ended a seven-month drought during which no Bay Area companies went public.<\/p>\n
Since then, a number of other Bay Area high-tech firms have gone public, and analysts speculate the strong performance of these fledgling companies is helping put IPOs back on their feet.<\/p>\n
The pieces also seem to be falling into place to keep the resurgence going, so long as the national economy continues to improve, said John Taylor, vice president of research with the National Venture Capital Association. That’s because a growing number of investors are jumping at the chance to bankroll companies at the earliest opportunity.<\/p>\n
“The most significant pickup is in investments for very early seed and start-up deals,” Taylor said. “These deals are flying below the radar screen right now. But they will be the prime IPO candidates for 2007, 2008 and 2009.”<\/p>\n
—–<\/p>\n
To see more of the Contra Costa Times, or to subscribe to the newspaper, go to http:\/\/www.bayarea.com<\/p>\n
(c) 2003, Contra Costa Times, Calif. Distributed by Knight Ridder\/Tribune Business News.<\/p>\n
EBAY, INTC, FORM,<\/p>\n","protected":false},"excerpt":{"rendered":"
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