May 1–National venture-capital investment tumbled during the first quarter to its lowest level since 1997, extending a three-year slide and reflecting continued economic uncertainty.
Surveys released this week by two consulting firms illustrated a venture community still unwilling to commit money at anywhere near the level recorded during the technology boom of 1999-2000.
PricewaterhouseCoopers said venture capitalists invested $3.8 billion in the first three months of 2003, down 41 percent from $6.5 billion in 2002. Ernst & Young pegged the 2003 figure at $3.4 billion.
Ernst & Young spokeswoman Katrin Van Oudenallen said Columbus fared the best in the firm’s Ohio Valley region, which includes Columbus, Cincinnati, Indiana and Kentucky.
Two Columbus companies received $25.4 million in the first quarter. Battelle spin-off BattellePharma, which is developing an asthma inhaler, received $22 million. Also, investors pumped $3.4 million into Resolution EBS, which creates software that helps companies streamline their sales processes and manage customer relationships.
The first-quarter investment in Columbus-based companies was about a third of last year’s total investment of $78.5 million. Nationally, the first-quarter figure of $3.8 billion is less than one-fifth of the $21.2 billion invested in 2002, PricewaterhouseCoopers said.
Yet it’s clear that growing companies face tough tasks raising money, said Mark Butterworth, chairman of the Columbus Venture Network.
“Even though venture investors invest for the long haul, they tend to be influenced by current investment trends and current economic conditions,” he said. “The economic uncertainty and what impact that the war would have on the country are causing venture capitalists to look very hard at making decisions.”
Venture firms backed 623 companies in the first quarter of 2003 compared with 726 in the first quarter of 2002, according to the MoneyTree Survey, produced by PriceWaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. The number of companies was the lowest since the third quarter of 1996.
Software companies still gained most of the first-quarter investment money: $790 million. That was a 13 percent decrease from the previous quarter. Also falling precipitously — despite Battelle Pharma’s infusion — was investment in medical devices, down 48 percent to $255 million. Investments in the telecommunications and networking fields also declined.
The recently surging biotechnology sector, which Columbus is trying to capitalize on, was among the best performers in the first quarter. Still, investment was nearly flat with $490 million invested in 49 companies.
“At this point, biotech is about the only area that looks like it has any near-term upside,” Butterworth said.
Venture investment in central Ohio traditionally has been centered on information technology, which is out of favor.
“This has been a very tough sector due to year 2000 overspending and also the Internet bubble,” Butterworth said.
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(c) 2003, The Columbus Dispatch, Ohio. Distributed by Knight Ridder/Tribune Business News.
