informa
/
1 MIN READ
News

VC Investment Ends Year On Upswing

Venture-capital funding in the fourth quarter was at its highest level since the summer of 2002, according to the VentureOne-Ernst & Young Venture Capital Report.
Venture-capital investment in the fourth quarter showed renewed signs of growth, with $4.5 billion invested in 496 financing rounds--the highest quarterly numbers since the summer of 2002, according to the VentureOne-Ernst & Young Venture Capital Report issued Monday.

The fourth quarter also saw a hefty upsurge in early-stage financing, with seed and first-round financing accounting for 31% of total deals, the first time that's occurred in more than a year. The majority of those deals were for software. "We are optimistic that continuing strength in the capital markets will translate into increased early-stage investment in 2004," says Gil Forer, global leader of the Ernst & Young Venture Capital Advisory Group.

The amount of money invested also rose in early-stage financing rounds, by 35% for seed and first rounds combined. In addition, there were 123 second-round financings, the highest level since the third quarter of 2002. Software continues to be the most active segment, with 145 financing rounds completed in the fourth quarter, a 13% increase. Biopharmaceuticals was second with 73 deals, up from 40 in the third quarter.

The report also notes that venture-capital activity in the San Francisco Bay area--a traditional bellwether for the venture-capital sector--was relatively strong, with more than $1 billion invested last quarter in the region's IT companies.

For the year, U.S. venture-capital investment slipped to $16.9 billion in 1,884 financings, a drop of 20% and 15%, respectively. Still, the fourth-quarter's robust activity ended the year on a positive note. Says John Gabbert, VentureOne VP of worldwide research: "Venture-capital activity appears to be trending upward."

Editor's Choice
Brian T. Horowitz, Contributing Reporter
Samuel Greengard, Contributing Reporter
Nathan Eddy, Freelance Writer
Brandon Taylor, Digital Editorial Program Manager
Jessica Davis, Senior Editor
Cynthia Harvey, Freelance Journalist, InformationWeek
Sara Peters, Editor-in-Chief, InformationWeek / Network Computing