VC Holds Steady in Q3 2003

For the fifth consecutive quarter, venture capital (VC) investments in the U.S. hovered around the $4 billion range, showing a sign of stability, according to two independent reports. The reports affirm the industry's shift in focus away from information technology and toward the life sciences.

While domestic VC investing appears to be on the mend, a European Commission report shows the European Union (EU) continues to lag the U.S. in investing activity. Venture capital investment in the EU has experienced a nearly 50 percent decline between 2000 (E19.6 billion) and 2002 (E10.1 billion), the report states. For comparison, U.S. venture capital investing in 2002 was E20 billion. The EU report is available at: http://europa.eu.int/comm/internal_market/en/finances/mobil/risk-capital_en.htm

MoneyTree™ Survey

For the first time in seven years, biotech was the leading industry with $873 million, PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey data show. Investments in biotech companies increased 31 percent from Q2 2003 and 88 percent from a year ago. The life sciences sector, which includes biotech and medical devices & equipment, totaled $1.24 billion or 30 percent of all dollars invested.

Second to biotech was the software industry, which was down 11 percent from the previous quarter with 160 companies receiving $819 million. Telecommunications fell to a five-year low of $492 million, but remained in third place. The medical devices and equipment sector was fourth with $376 million, and networking was fifth, also falling to a five-year low with $331 million.

Overall investments totaled $4.2 billion in the third quarter, down 8 percent from Q2 2003, the data show. A total of 667 entrepreneurial companies received funding, a decrease of 5 percent over the previous quarter. Since Q3 2002, venture capitalists have invested in the range of $4 billion per quarter, a stable pace of investing, according to the MoneyTree™ Survey.

Detailed information for the third quarter of 2003 is available by region, industry and stage of finance at http://www.pwcmoneytree.com. Historical data dating back to 1995 also are available for the U.S. and selected regions.

Additionally, SSTI has prepared a table <http://www.ssti.org/Digest/Tables/111403t.htm> to present the MoneyTree™ Survey results for Q3 2003 by state. The table includes data for the number of deals, total amount invested, average deal size and ranking.

Growthink Research

The Growthink Private Equity Funding Reports, which profile only private, U.S.-based companies that receive equity investments of $300,000 or more, found 63 biotech and pharmaceutical companies received $949 million in venture capital deals. This enabled the healthcare sector to post another quarter-to-quarter increase in funding with 124 total ventures. Still, 34.5 percent of the total dollars invested went to companies in the connectivity sector, 2.3 percent more than healthcare. Overall, nearly $4.1 billion of venture capital was invested in 457 private companies in Q3 03.

Among major metropolitan areas, the San Francisco Bay Area continued to lead the nation with nearly $1.3 billion in investments, or 31.8 percent of the nation's total, and 125 companies securing deals. Boston was next with $486.6 million (11.9 percent) and 49 deals. After a subpar second quarter, New York City reclaimed the third position from San Diego, which dropped to fourth.

The Los Angeles, Washington D.C., Austin, Philadelphia, Denver/Boulder and Minneapolis/St. Paul metro areas rounded out the top 10, which accounted for 71.9 percent of the nation's total second quarter VC activity. Seattle and Irvine/Santa Ana fell from the top 10.

Growthink figures also differ from the Moneytree™ Survey in that Growthink does not collect information on venture capital investments in public companies, debt financing or other areas. The third quarter survey, with data arranged by geographic region, state, metro area and industrial sector, is available in individual sections or in its entirety at: http://www.growthinkresearch.com