Boston, MA -
The National Venture Capital Association (NVCA) and Venture Economics (VE) today announced venture capital investments in entrepreneurial companies soared to record levels in the first quarter of 2000. During Q1 of this year, venture capitalists invested $22.7 billion into companies, compared to $6.2 billion in the first quarter of 1999 - representing a 266 percent increase.
The number of companies receiving venture-backed financing also increased dramatically. In the first quarter of the year, 1,557 companies received financing, compared to only 851 companies in Q1 1999.
"Average investments per company have risen because entrepreneurial companies need more capital to establish a leading market position," said Steve Lazarus, chairman of NVCA's Research Committee and managing partner of ARCH Venture Partners. "In addition, the Internet has broken down regional boundaries, making target markets larger. Today's young companies must also establish global leadership in their early stages of development, which requires significant infrastructure investment."
STAGE
Venture capitalists are focusing their investments on companies in earlier stages of their development. In Q1 2000, 85.2 percent of all venture capital investments went to companies in the early or expansion stage. This is in contrast to 64.8 percent in the first quarter just a year ago. Expansion-stage companies received the largest percentage of investment in Q1 2000, with 61.9 percent of all investments focused on companies in the growth phases.
INDUSTRY
There has been little change over the past year as to the industries that are attracting the most venture capital dollars. Computer-Related and Communications remain the most attractive industries, with Computer-Related companies receiving $12.4 billion and Communications companies receiving $6.02 billion this quarter. In the Internet-Related(a) investments category, there has been a slight shift in areas of interest. Whereas Internet-Related Services attracted the most interest in Q1 1999, B2B Internet-Related investments attracted the most interest in Q1 2000. Overall, Internet-Related(a) companies received more investments than any other sector, receiving a total of $17.05 billion in Q1 2000.
REGIONAL GROWTH
All regions continue to grow, with Northern California and the Northeast capturing the most investments and experiencing the most growth. Among the states, Illinois, Georgia and New York had the highest growth rates.
TOTAL INVESTMENTS ($ Millions)
----------- ---------------- ------------------- --------------
Quarter No. of Companies Average Per Company Sum Invested
----------- ---------------- ------------------- --------------
2000 - Q1
1,557
$14.57
$22,684.35
----------- ---------------- ------------------- --------------
1999 - Q4
1,546
$13.60
$21,021.77
----------- ---------------- ------------------- --------------
1999 - Q3
1,264
$10.29
$13,004.83
----------- ---------------- ------------------- --------------
1999 - Q2
1,118
$9.44
$10,554.58
----------- ---------------- ------------------- --------------
1999 - Q1
851
$7.24
$6,161.19
----------- ---------------- ------------------- --------------
STAGE
------------- ---------------------- -----------------------
Stage
Pct. of Total Invested Pct. of Total Invested
Q1-2000
Q1-1999
------------- ---------------------- -----------------------
Early Stage 23.31%
21.29%
------------- ---------------------- -----------------------
Expansion
61.89%
43.48%
------------- ---------------------- -----------------------
Later Stage 11.82%
28.55%
------------- ---------------------- -----------------------
Buyout/Acq. 2.9%
6.46%
------------- ---------------------- -----------------------
Other
.09%
.22%
------------- ---------------------- -----------------------
MAJOR INDUSTRY GROUPS ($ Millions)
----------------------------------------------------------------------
Industry No. Companies Avg. Per Company Sum Invested Sum Invested
Group
Q1-2000
Q1-2000
Q1-2000
Q1-1999
----------------------------------------------------------------------
Computer
Related
859
$14.47
$12,430.71
$2,565.80
----------------------------------------------------------------------
Communications
335
$17.98
$6,021.98
$1,632.00
----------------------------------------------------------------------
Non-High Tech
151
$15.07
$2,274.89
$802.05
----------------------------------------------------------------------
Medical/Health
114
$6.94
$791.52
$678.98
----------------------------------------------------------------------
Semiconductors/
Electronics
45
$14.53
$653.75
$267.43
----------------------------------------------------------------------
Biotechnology
53
$9.65
$511.51
$214.93
----------------------------------------------------------------------
TOTAL
$22,684.35
$6,161.19
----------------------------------------------------------------------
INTERNET-RELATED(a) INVESTMENTS ($ Millions)
----------------------------------------------------------------------
Internet
Sum
Percent of
Sum
Percent of
Group
Q1 2000 Internet Related Q1 1999 Internet Related
----------------------------------------------------------------------
B2B
$4,719.77
27.67%
$647.87
19.96%
----------------------------------------------------------------------
B2C
$3,205.53
18.79%
$541.14
16.67%
----------------------------------------------------------------------
Communications/
Infrastructure $5,158.45
30.25%
$890.97
27.45%
----------------------------------------------------------------------
Services &
Other Internet
Related
$3,971.72
23.29% $1,166.29
35.93%
----------------------------------------------------------------------
TOTAL
$17,055.47
100.00% $3,246.27
100.00%
----------------------------------------------------------------------
(a) Internet-related describes companies that provide content,
e-commerce, hardware or services to the Internet economy.
Internet-related companies are found in all industry sectors.
REGIONAL BREAKDOWN ($ Millions)
----------------------------------------------------------------------
Region
Amount Invested Amount Invested Percentage
Q1-2000
Q1-1999
Growth
----------------------------------------------------------------------
Northern California
$7,945.58
$1,779.43
347%
--------------------------------------------------------------------
Northeast
$5,439.19
$1,374.24
296%
--------------------------------------------------------------------
Southeast
$1,851.81
$525.09
253%
--------------------------------------------------------------------
Southern California
$1,742.84
$579.36
201%
--------------------------------------------------------------------
Southwest
$1,617.66
$474.85
241%
--------------------------------------------------------------------
Midwest
$1,360.35
$464.01
193%
--------------------------------------------------------------------
Mid-Atlantic
$1,359.77
$431.83
215%
--------------------------------------------------------------------
Northwest
$827.39
$279.44
196%
--------------------------------------------------------------------
Rocky Mountain
$509.65
$248.22
105%
--------------------------------------------------------------------
STATE BREAKDOWN ($ Millions)
----------------------------------------------------------------------
State
Amount Invested Amount Invested Percentage
Q1-2000
Q1-1999
Growth
--------------------------------------------------------------------
California
$9,688
$2,358.79
311%
--------------------------------------------------------------------
Massachusetts
$2,167
$712.94
204%
--------------------------------------------------------------------
New York
$1,770
$400.77
342%
--------------------------------------------------------------------
Texas
$1,514
$422.85
258%
--------------------------------------------------------------------
Georgia
$700
$122.39
472%
--------------------------------------------------------------------
Washington
$600
$250.24
140%
--------------------------------------------------------------------
Illinois
$600
$63.17
850%
--------------------------------------------------------------------
The number of companies receiving venture-backed financing also increased dramatically. In the first quarter of the year, 1,557 companies received financing, compared to only 851 companies in Q1 1999.
"Average investments per company have risen because entrepreneurial companies need more capital to establish a leading market position," said Steve Lazarus, chairman of NVCA's Research Committee and managing partner of ARCH Venture Partners. "In addition, the Internet has broken down regional boundaries, making target markets larger. Today's young companies must also establish global leadership in their early stages of development, which requires significant infrastructure investment."
STAGE
Venture capitalists are focusing their investments on companies in earlier stages of their development. In Q1 2000, 85.2 percent of all venture capital investments went to companies in the early or expansion stage. This is in contrast to 64.8 percent in the first quarter just a year ago. Expansion-stage companies received the largest percentage of investment in Q1 2000, with 61.9 percent of all investments focused on companies in the growth phases.
INDUSTRY
There has been little change over the past year as to the industries that are attracting the most venture capital dollars. Computer-Related and Communications remain the most attractive industries, with Computer-Related companies receiving $12.4 billion and Communications companies receiving $6.02 billion this quarter. In the Internet-Related(a) investments category, there has been a slight shift in areas of interest. Whereas Internet-Related Services attracted the most interest in Q1 1999, B2B Internet-Related investments attracted the most interest in Q1 2000. Overall, Internet-Related(a) companies received more investments than any other sector, receiving a total of $17.05 billion in Q1 2000.
REGIONAL GROWTH
All regions continue to grow, with Northern California and the Northeast capturing the most investments and experiencing the most growth. Among the states, Illinois, Georgia and New York had the highest growth rates.
TOTAL INVESTMENTS ($ Millions)
----------- ---------------- ------------------- --------------
Quarter No. of Companies Average Per Company Sum Invested
----------- ---------------- ------------------- --------------
2000 - Q1
1,557
$14.57
$22,684.35
----------- ---------------- ------------------- --------------
1999 - Q4
1,546
$13.60
$21,021.77
----------- ---------------- ------------------- --------------
1999 - Q3
1,264
$10.29
$13,004.83
----------- ---------------- ------------------- --------------
1999 - Q2
1,118
$9.44
$10,554.58
----------- ---------------- ------------------- --------------
1999 - Q1
851
$7.24
$6,161.19
----------- ---------------- ------------------- --------------
STAGE
------------- ---------------------- -----------------------
Stage
Pct. of Total Invested Pct. of Total Invested
Q1-2000
Q1-1999
------------- ---------------------- -----------------------
Early Stage 23.31%
21.29%
------------- ---------------------- -----------------------
Expansion
61.89%
43.48%
------------- ---------------------- -----------------------
Later Stage 11.82%
28.55%
------------- ---------------------- -----------------------
Buyout/Acq. 2.9%
6.46%
------------- ---------------------- -----------------------
Other
.09%
.22%
------------- ---------------------- -----------------------
MAJOR INDUSTRY GROUPS ($ Millions)
----------------------------------------------------------------------
Industry No. Companies Avg. Per Company Sum Invested Sum Invested
Group
Q1-2000
Q1-2000
Q1-2000
Q1-1999
----------------------------------------------------------------------
Computer
Related
859
$14.47
$12,430.71
$2,565.80
----------------------------------------------------------------------
Communications
335
$17.98
$6,021.98
$1,632.00
----------------------------------------------------------------------
Non-High Tech
151
$15.07
$2,274.89
$802.05
----------------------------------------------------------------------
Medical/Health
114
$6.94
$791.52
$678.98
----------------------------------------------------------------------
Semiconductors/
Electronics
45
$14.53
$653.75
$267.43
----------------------------------------------------------------------
Biotechnology
53
$9.65
$511.51
$214.93
----------------------------------------------------------------------
TOTAL
$22,684.35
$6,161.19
----------------------------------------------------------------------
INTERNET-RELATED(a) INVESTMENTS ($ Millions)
----------------------------------------------------------------------
Internet
Sum
Percent of
Sum
Percent of
Group
Q1 2000 Internet Related Q1 1999 Internet Related
----------------------------------------------------------------------
B2B
$4,719.77
27.67%
$647.87
19.96%
----------------------------------------------------------------------
B2C
$3,205.53
18.79%
$541.14
16.67%
----------------------------------------------------------------------
Communications/
Infrastructure $5,158.45
30.25%
$890.97
27.45%
----------------------------------------------------------------------
Services &
Other Internet
Related
$3,971.72
23.29% $1,166.29
35.93%
----------------------------------------------------------------------
TOTAL
$17,055.47
100.00% $3,246.27
100.00%
----------------------------------------------------------------------
(a) Internet-related describes companies that provide content,
e-commerce, hardware or services to the Internet economy.
Internet-related companies are found in all industry sectors.
REGIONAL BREAKDOWN ($ Millions)
----------------------------------------------------------------------
Region
Amount Invested Amount Invested Percentage
Q1-2000
Q1-1999
Growth
----------------------------------------------------------------------
Northern California
$7,945.58
$1,779.43
347%
--------------------------------------------------------------------
Northeast
$5,439.19
$1,374.24
296%
--------------------------------------------------------------------
Southeast
$1,851.81
$525.09
253%
--------------------------------------------------------------------
Southern California
$1,742.84
$579.36
201%
--------------------------------------------------------------------
Southwest
$1,617.66
$474.85
241%
--------------------------------------------------------------------
Midwest
$1,360.35
$464.01
193%
--------------------------------------------------------------------
Mid-Atlantic
$1,359.77
$431.83
215%
--------------------------------------------------------------------
Northwest
$827.39
$279.44
196%
--------------------------------------------------------------------
Rocky Mountain
$509.65
$248.22
105%
--------------------------------------------------------------------
STATE BREAKDOWN ($ Millions)
----------------------------------------------------------------------
State
Amount Invested Amount Invested Percentage
Q1-2000
Q1-1999
Growth
--------------------------------------------------------------------
California
$9,688
$2,358.79
311%
--------------------------------------------------------------------
Massachusetts
$2,167
$712.94
204%
--------------------------------------------------------------------
New York
$1,770
$400.77
342%
--------------------------------------------------------------------
Texas
$1,514
$422.85
258%
--------------------------------------------------------------------
Georgia
$700
$122.39
472%
--------------------------------------------------------------------
Washington
$600
$250.24
140%
--------------------------------------------------------------------
Illinois
$600
$63.17
850%
--------------------------------------------------------------------
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