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Internet still reaps bulk of VC funds, but loses ground

Mon, 07/30/2001 - 8:00pm
Anne Kerven

Internet-specific companies took $3 billion, or the bulk of the country's venture capital, although its percentage of the total pot is losing ground to the life sciences sector, a study says.

A joint study from Venture Economics and the National Venture Capital Association says venture capitalists invested $10.6 billion in 982 companies in the second quarter — or 61 percent less than a year ago and 12 percent less than in the first quarter.

Of that, Internet-specific companies topped the list at $3 billion of the $10.6 billion, but its overall share fell to 28.4 percent from first-quarter's 34.3 percent, the study days. But medical/health/life sciences went up to 13.8 percent of the total, from 11.2 percent in first quarter and up from 3.95 percent a year ago.

Communications and media ranked third with $1.8 billion or 17.5 percent of the total dollars invested, and computer software and services ran second, at $2.2 billion or 20.9 percent of the total.

Semiconductors/other electronics came in fifth with $842.66 million, or 7.93 percent of total investments.

Within the Internet sector, investments in hardware companies increased 34 percent between first and second quarters, from $208.7 million to $280 million.

Communications/infrastructure ranked second at $1.98 billion, or 18.6 percent of the total Internet investment. The study says VCs invested in 109 companies in this category, with an average $18.18 million per company.

Internet software and tools followed closely with 18.38 percent of Internet investments, or $1.95 billion. Internet-related hardware and Internet services took $279.98 million and $606.16 million respectively.

Finally, VCs were more inclined to invest in expansion stage companies, which pulled in 54.9 percent of the total investment, while early and later stage companies saw slightly decreased percentage. Northern California holds the lead for investment, although its share dropped to 29.5 percent from 34 percent a year ago.

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