The amount of venture capital invested in the US in 2004
increased for the first time since 2001, according to two
recently released venture-capital surveys. In venture-capital
history, this marks 2004 as the year VCs recovered from last
decade's boom (in 2000, venture capitalists invested a whopping
$103 billion into startups) and subsequent bust.
In today's more cautious climate, VCs mainly invest in middle
or later stage private companies that either go public or
get acquired.
"We're not seeing the breakthrough ideas we did in
the past," says Wes Raffel, general partner at Advanced
Technology Ventures, "As VCs are less willing to take
risks to get big returns these days."
The signs that venture-backed companies are putting more
money into investments are positive, however. Venture capitalists
reversed a three-year downward trend by investing $20.9 billion,
up 11.9% in 2004, according to the MoneyTree Survey by PricewaterhouseCoopers,
Thomson Venture Economics and the National Venture Capital
Association. A similar survey by Ernst & Young LLP and
VentureOne calculated total investments at $20.4 billion,
an 8% annual rise.
"It is a good time to be a venture capitalist," Mark
Heesen, president of the National Venture Capital Association
said in a statement. "We may well see a shift in focus
back to early stage companies in the following year."
Tracy Lefteroff, global managing partner of the venture
capital practice at PricewaterhouseCoopers, added: "It's
a good time to be an entrepreneur." She stresses that "potential,
prudence and patience" are the key words for aspiring
entrepreneurs to consider.
Gil Forer, global leader of the Venture Capital Advisory
Group at Ernst & Young, said 2004 was a rebuilding year. "While
we are not anticipating another bubble, it is fair to say
that we are at a starting point in a new venture-capital
investment cycle," he said.
The Life Sciences sector (Biotechnology and Medical Devices
industries) dominate the field, accounting for 27% of all
Venture Capital dollars. Venture Capitalists sunk $5.6
billion in 578 companies in 2004, the largest "dollars
and deals" in four years.
The Software Industry followed second with $5.1 billion
invested, representing 24% of all venture capital dollars.
Yet in terms of numbers software is the leader, with 862
companies funded through venture capital. The success of
Google will spark another round of high-level venture capital
funding in 2005, the Global Entrepreneurship model concludes.
The Global Entrepreneurship Monitor, conducted by Babson
College and the London Business School, is a survey of business
conditions in 34 countries around the world. According to
the survey, the US dominates the worldwide venture capital
market.
Do you have a comment or feedback on
this article? Email
us and let us know what you think.
|
