Apr. 29–Venture-capital investments in Colorado Springs companies languished in the first quarter as financing deals nationwide fell for the twelfth consecutive quarter.
No locally based startup companies received venture capital during the first three months of 2003, according to the MoneyTree Survey, to be released todayTUESDAY by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.
The dismal first quarter compares poorly to the first quarter of 2002, when one Springs company received $15 million.
Colorado Springs companies haven’t received venture funding since the third quarter of last year, according to the report.
Venture capital refers to private investments in a company. Investors usually receive an owners hip stake in the firm, which uses the money to release products and grow.
First-quarter investments fell nationally and in Colorado compared with the same period in 2002, the report found.
“If we haven’t hit rock bottom, we certainly are close to it,” said Matt Kosmicki, technology partner at PricewaterhouseCoopers in Denver.
Venture investments across the country skyrocketed several years ago but began to dive in the second half of 2000, mirroring the technology crash on Wall Street and a weakening economy.
As a result, venture funds have suffered and investors lost fortunes on companies that never made profits. Some firms never released products.
In 2002, for example, venture funds posted an average loss of 23.3 percent.
Angel investors — private individuals who typically invest small sums of money in companies — also have become more cautious in the past two years, said Kara McAnulty, associate director of the nonprofit Colorado Springs Technology Incubator, which helps small companies get off the ground.
“The behavior of angels right now is similar to the behavior of angels for the past year and a half,” McAnulty said. “It’s difficult even for good ideas to get funding right now.”
Two companies in the incubator are in negotiations for angel funding, McAnulty said, but it takes longer than it did several years ago.
In addition to the shaky economy, the war with Iraq added uncertainty for investors in the first quarter.
Statewide, venture capital investments during the quarter totaled $152 million, up 31 percent from the fourth quarter of 2002 but down 32 percent from the first quarter last year.
Fourteen Colorado companies, including two in the industrial/energy sector, received funding in the first three months of 2003.
Nationally, venture investments fell 41 percent from the year-ago period. In the first quarter of 2003, 623 companies received $3.8 billion in venture capital, compared with the 816 firms that secured $6.5 billion in the first quarter of 2002.
The software industry secured the most money, landing 20 percent of money invested in the first quarter of 2003.
It may take a while before venture capital recovers.
“We need to have general stability of the economy and improvement in the public markets before we start to see improvements overall in venture capital,” Kosmicki said.
“Venture capital funding does not drive our economy or improve our economy, it follows what happens with the overall economy.”
The MoneyTree survey contains venture deals by U.S. and foreign investment firms. It includes companies that have received money.
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(c) 2003, The Gazette, Colorado Springs, Colo. Distributed by Knight Ridder/Tribune Business News.
