Opinions expressed by Entrepreneur contributors are their own.
In the first quarter of 2001,
early-stage, pre-IPO companies raised less money than they have
since the second quarter of 1999. According to the
"PricewaterhouseCoopers MoneyTree Survey in Partnership With
VentureOne," total equity financings in venture-backed
companies fell to $10.1 billion in the first quarter of 2001, a 40
percent drop from the last quarter of 2000. That represents the
steepest quarter-to-quarter drop in history in terms of absolute
What does that mean for companies seeking
financing? The number of businesses receiving early-stage funding
dropped from 453 in fourth quarter 2000 to 235 in first quarter
2001, a 48 percent decline. Yet the median dollar amount each
business received fell only 13 percent, from $10.9 million to $9.5
million per company (see below for first quarter investments for
the last three years). So while it's more difficult for
companies to get backing, those that do, get plenty of it to grow
rapidly. Plus, industry sectors like networking,
telecommunications, consumer and business services and software
continue to attract huge amounts of funding compared to mid-1990s
The dramatic drop-off in investing
doesn't necessarily indicate a significant economic downturn.
Setting aside the Internet gold rush of the last two years, the
current climate is still more aggressive than historical norms and
will likely remain that way. The bottom line is that entrepreneurs
need more than just a new idea to get funding.
-Tracy T. Lefterof,
Global Managing Partner,
Venture Capital Practice, PricewaterhouseCoopers
Invested per Round of
Equity Financing ($M)
Equity financings include cash
investments by professional venture capital
firms, corporations, private placement and individuals into
have received at least one round of professional venture
Money Tree Survey
in Partnership with VentureOne"
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