VC Money Still Flows, But IT Funding Takes A Hit

Despite a huge drop from the year 2000's $94.3 billion, 2001 is the third most-active year for venture-capital investment, according to numbers released last week by VentureWire, which has been tracking venture-capital investment for 15 years.

Private U.S. companies raised $35.3 billion in more than 3,000 financings-less than half of the 6,420 that took place in 2000. Funding remained strong in the biotech and medical devices sectors, though money for IT fell across the board. "But [2001] still shapes up as a very solid year," VentureWire editor Ken Andersen says. "As recently as 1998, U.S. startups only raised $13 billion."

Oliver Curme of venture-capital firm Battery Ventures did 12 investment deals this year, down from about twice that number in each of the two previous years. But Curme knows firsthand that VCs aren't keeping their cash on the sidelines. "We're seeing a lot of situations where we're getting outbid," he says, "because there's a lot of money out there."

Information sciences companies raised the most money in 2001: $29.3 billion, down from 2000's $83.4 billion.