National venture capital expenditures continued to slide in the third quarter as investors reacted to the ongoing economic slump and tech-sector recession.
According to recent figures from the National Venture Capital Association, venture capitalists pumped $7.7 billion into 873 companies, a 31 percent decline from the previous quarter.
“Although these are clearly difficult times for all business sectors, the venture industry will persevere,” said NVCA President Mark G. Heesen. “Veterans in our industry recognize this downturn as part of the long-term venture capital cycle. Real value can be created in down cycles by sticking with committed entrepreneurs with strong business models and the tenacity to see their ideas through,”
Accentuating the positive, the NVCA said the current investment figure is close to the $7.2 billion spent in the first quarter of 1999 — considered very healthy at the time.
Internet companies received $2 billion of the new venture capital money, followed by communications and media companies with $1.7 billion. Computer and software services firms got $1.3 billion.
Venture capitalists are clearly feeding much of the money into later stage investments rather than startups. Fifty-three percent of investments went to existing companies, versus less than 1 percent to new companies in need of seed money.
Continuing a longstanding trend, Northern California companies soaked up the lions share of the money — $2.4 billion, or 30 percent. Second were New England-based companies taking $1 billion or 13 percent.