Patient, Measured Investing In 4Q

The downward spiral of venture-capital funding slowed in the fourth quarter, when investments in startups totaled $4.2 billion, down about 7% from $4.5 billion in third-quarter investments, according to the quarterly MoneyTree survey by PricewaterhouseCoopers, Thomson Venture Economics, and the National Venture Capital Association. By comparison, third-quarter VC investment declined more than 25% from the quarter before.

Venture investment for all of last year was $21.2 billion, about half of the $41.3 billion invested in 2001. Software companies garnered $4.3 billion--or about 20%--of that money.

More fourth-quarter deals--692 versus 671 in the third quarter--show that investors are putting smaller bets on more companies, says Bill Elmore, general partner of VC firm Foundation Capital. "VCs are giving smaller amounts of money up front," he says. "Don't mistake patience for pessimism."