NEW YORK-Venture capital-backed investments during the first quarter of 1997 totaled $2.3 billion, up 5 percent compared with the same period last year, according to Price Waterhouse L.L.P.’s National Venture Capital Survey, released May 22. Venture capital investments, excluding buy-outs and initial public offerings, amounted to $2.14 billion during the latest complete quarter.
Driving this growth was an unprecedented rise in venture capital funds flowing into startup and early stage companies and a dramatic doubling of investment into Internet-related companies.
“The broad segment of communications is up 20 percent from first quarter 1996, compared to 5 percent for all industries combined,” said Kirk Walden, national venture capital survey director for Price Waterhouse’s Technology Industry Group, Dallas. “The telecom/wireless sector increased 50 percent to $202 million, a growth rate second only to Internet-related investments. It’s clear that decreased regulation and increased competition, coupled with overall telecom/wireless industry growth, is creating more and more investment opportunities.”
In the wireless sector, there were two big dollar getters that stood out during the first quarter of this year. SBA Communications Corp., a Boca Raton, Fla., company involved in wireless communications site acquisition and management, received $30 million in first-stage venture capital financing. Directel International L.L.C., headquartered in Plano, Texas, received $25 million in seed capital for providing paging services in Argentina and Brazil.
During the first quarter of this year, 281 start-up/seed and early stage companies attracted venture capital, an increase of 45 percent from the 194 start-up companies that received funds during the same quarter of 1996. These formative-stage companies captured $929 million of the overall $2.34 billion invested-a 75-percent jump from the $572 million during the same period a year ago.
“This increased activity in the start-up/seed and early stage companies demonstrates that venture capitalists are being more aggressive than ever before, investing in formative-stage companies without hesitation,” said Don McGovern, chairman of the Price Waterhouse Technology Industry Group. “This shows us that venture capitalists are not shying away from high-risk investments as some had thought.”
Technology-based companies again collected the greatest share of all venture capital investments in the first quarter-62 percent, or $1.4 billion, a slight increase compared with the same period in 1996. Within the technology industry, the software and communications segments attracted more than $1 billion in investments in 261 companies.
“Convergence continues to create opportunities in these two interrelated sectors,” McGovern said. “We expect them to grow in tandem throughout the year.”
While Silicon Valley and New England retained first and second place, collecting $571.3 million and $397.5 million respectively, the geographic diversity of venture capital investments across the United States continues to increase.
“Software investments were concentrated in Silicon Valley and New England as you would expect,” McGovern said.
The first quarter 1997 survey tallied results from 416 United States-based venture capital firms, a 41 percent response rate. Respondents identified 152 co-investors.
Further information about the survey can be obtained on the Web at http: www.pw.com/vc
