VC Investments Down Again; End May Be NearVC Investments Down Again; End May Be Near

If two consecutive quarters of shrinking gross domestic product make a recession, then the venture-capital market, where investment has declined for six straight quarters, has been there for a while. VC money fell 23%, or $1.9 billion, to $6.48 billion during the third quarter, PricewaterhouseCoopers found in a survey conducted with VentureOne that was released last week.

Still, investments this year should reach $30 billion, making 2001 the third-largest VC year ever. Equity investment in venture-backed startups through the first nine months was $25.44 billion, less than the last two years but far ahead of 1998's full-year total of $17.50 billion. Two sectors grew slightly in the quarter: biopharmaceutical companies, which raised $581 million, and the semiconductor industry, which pulled in $432 million. Tracy Lefteroff, global managing partner of PricewaterhouseCoopers' VC practice, expects a smaller decline in the fourth quarter because he believes public equity markets have stopped their slide. Says Lefteroff, "It says a lot about the amount of capital and the tenacity of VCs to put that money to work."