When the dot-com bubble burst, it didn't bust for most technology companies that won initial venture backing during the boom times in the last years of the last century.
In all, 58%--or 1,971--of tech firms that first received venture capital in 1999 and 2000 remain private and independent, according to Venture Capital Analyst-Technology, a newsletter published by the venture-capitalist research firm VentureOne. One example: Netrake Corp., a Plano, Texas, provider of session controllers for voice-over-IP interconnections that first raised venture capital in 2000; it secured $20 million in fourth-round funding last week.
But surviving the bust doesn't equate to profitability. Only 16% of these bubble survivors have turned a profit, and half have gone more than two years since their last round of venture financing, the newsletter reports. "Venture investors have always had to juggle new and old companies," newsletter editor Russ Garland says. "What's continuing to haunt the industry is that VCs backed too many startups during the tech boom."
Garland says the surviving bubble-era companies have proven to be remarkably durable. "All signs point to another shakeout, but with the market for technology on the upswing, venture capitalists should get clear signals about which of their portfolio companies are potential winners," he says. "They just need to pay attention."