Hints Of Recovery Spark VCs After Slow YearHints Of Recovery Spark VCs After Slow Year

An 18-month decline in venture-capital investments appears to be over, but the cash flowing to startup companies last year was only about a third of the amount made available during the easy-money days of 2000.

A survey by PricewaterhouseCoopers, Venture Economics, and the National Venture Capital Association shows VC investors last year pumped $36.54 billion into companies, compared with $99.63 billion in 2000. But the quarterly trend suggests a glint of optimism in the equity market for high-tech companies. Investors put $7.14 billion into startups in the fourth quarter of last year, up from $7.0 billion in the third quarter. That's still a huge decline from the last quarter of 2000, which saw $20.94 billion in venture-capital IT investment.

For the IT industry, things seem most promising in the software sector, where investments rose to $1.61 billion last quarter and accounted for 22.5% of all investments, up from $1.18 billion, or 16.9% of all investments, in the third quarter. Tracy Lefteroff, managing partner of PricewaterhouseCoopers' venture-capital practice, says that money is going mostly toward enterprise software development.

Things weren't so cheery in the telecommunications and networking industries. Quarterly telecom funding was down to $982.4 million, from $1.0 billion in the third quarter, and networking and equipment investments totaled $989.0 million, compared with $1.28 billion in the previous quarter. Life sciences, which includes biotechnology, is gaining the most momentum, grabbing 18.5% of total venture-capital investment in the fourth quarter, compared with 7.97% a year earlier.