Venture funding climate stabilises at $7bn

The decline in venture capital investment in IT start-ups is abating, according to the latest figures from the US National Venture Capital Association.

VC investors sunk $7.1 billion (€8.2bn) into start-ups in the fourth quarter, slightly up on the $7 billion (€8.1bn) invested in the previous quarter. It marks the first sequential increase in VC funding since the second quarter of 2000.

The number of companies that received funding has also risen, from 810 in the third quarter of 2001 to 856 in the following three month period. However, this is dramatically down on the same period a year earlier when 1,598 companies received funding.

Data from VentureOne, a rival VC research firm, partially confirms these findings,. However, VentureOne calculated venture capital investment had actually fallen slightly in the last three months of 2001 to $6.3 billion (€7.3bn), compared with $6.6 billion (€7.6bn) in the third quarter. The VC researchers calculated that 610 companies received investment compared with 629 in the preceding quarter.

Analysts expect investment levels to stabilise between $6 billion (€7bn) and $8 billion (€9.3bn) in the next few quarters – an arguably more realistic and sustainable level than that seen in 1999, when an overheated economy produced many poorly conceived and unviable VC investment strategies.

Internet Usage figures also show that the dot-com boom-and-bust has done nothing to dampen interest in the Internet. Government data from a US Government Commerce Department report reveals that, as of September last year, 143 million US citizens – or 54% of the American population – regularly went on-line, compared with just 26% of the country a year earlier.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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