VC Figures Hint at Upswing
The MoneyTree study, produced quarterly by PricewaterhouseCoopers, Thomson Venture Economics, and the National Venture Capital Association, says venture funding increased to $4.3 billion in the second quarter of 2003, versus $4 billion in the first quarter.
That extra $300 million may look paltry compared to the boom times, but it represents the first quarter-to-quarter growth in VC funding since 2001, the surveyors say. Still, while the growth appears to signal an anticipated uptick, it's too soon to call a trend (see Venture Uptick Coming?).
"[B]efore we declare a trend reversal we must first see a sustained opening of the IPO market and consecutive quarterly increases in corporate capital expenditures," says Mark Heesen, president of the National Venture Capital Association, in a prepared statement.
But MoneyTree gives cause for hope: Telecom companies ranked number three among industries taking the most VC money in the first half of 2003, the survey says -- following biotechnology and software. What's more, the $615 million that went to 70 telecom companies this quarter represented an increase of 21 percent over the first quarter.
Interestingly, enterprise networking companies aren't keeping pace: They showed a 7 percent reduction in funding, to $427 million.
An indicator of growth is that more early-stage companies are getting funding, according to MoneyTree. In the second quarter 2003, investments in early-stage startups shot up 43 percent over the first quarter, to $956 million. This is the first "significant increase," MoneyTree says, since 1999.
Another survey of 48 IT-oriented venture firms, conducted by search firm Venator Partners, says 86 percent of respondents "say they are deal hunting more actively than they were a year ago." And 69 percent of respondents say they'll be focusing on early-stage investments in the next year.
A third survey, from Cap Gemini Ernst & Young and VentureOne, says U.S. venture funding perked up during the second quarter 2003, for the first time since 2000.
Still, caution's the word: While Ernst & Young/VentureOne's survey says deals totaled $3.9 billion for the second quarter of 2003, up from $3.5 billion in the first quarter, it also shows that VC output of $7.5 billion for the the first half of this year isn't keeping pace with the $11.5 million raised during the first half of 2002. The number of VC rounds also has dwindled -- 866 for the first half of this year, compared to 1,157 for the first half of 2002.
The data also shows that communications companies offering a range of equipment and services are still a downer. While comprising roughly 17 percent of all funding so far this year, investment in networking gear, ISPs and other telecom providers, and even wireless gear and services, dropped from $743 million in the first quarter of this year to $564.5 million in the second quarter.
— Mary Jander, Senior Editor, Light Reading