After the Flood With the flow of VC funding slowed to a trickle, let our list of the top 100 VC funds be your divining rod.

Now that the venture capital free-fall is ending, can you land the right VC to launch your company into the big time?

True, overall venture capital investing last year was far below the dotcom bubble years of 1999 and 2000. But, at over $36 billion, 2001 was still the third largest year in history, and 2002 looks like it will stabilize well above historical norms. That's good news for early-stage companies.

"During most of last year, venture capitalists spent the majority of their time working closely with their existing portfolio companies, leaving less time to make investments in new companies," says Mark Heeson, president of the National Venture Capital Association. "By the beginning of this year, the focus was beginning to shift back toward evaluating new opportunities."

The numbers bear that out. According to the PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree Survey, prepared exclusively for Entrepreneur, 800 start-up and early-stage companies received their first round of venture capital in 2001. All told, these companies got $5.4 billion, or an average of $6.8 million per company. It doesn't exactly sound like a dearth, does it? (For a list of firms that made the most first-round deals, see "Top 100 Venture Capital Firms for Entrepreneurs.")

So what are VCs looking for in this New-New Economy? Joe Aragona, general partner at Austin Ventures, an Austin, Texas, firm with $3.1 billion under management, explains it this way: "Most large VC firms have decided to invest through [business] cycles not in cycles. For early-stage investing, a premium is being placed on management, operations and execution instead of a slick PowerPoint presentation."

Jeffrey Harris, managing director of Warburg Pincus, a New York City firm with $9.5 billion under management, agrees. "Both entrepreneurs' and venture capitalists' expectations have reverted to the norm," Harris says. "They're now expecting that it will take years to start a successful company, and they're pacing themselves accordingly with the appropriate burn rates, appropriate incentive plans, and the appropriate amount of capital to make sure the company is on solid footing."

All this hearkens a back-to-basics approach in the industry. An environment where shirt-sleeves experience and innovative thinking combined with venture capital create exciting, successful companies over time. And building sustainable value is what fuels America's economic growth.

Doing the Numbers
Rankings are based on the number of first-time fundings to companies in the start-up and early stages of development made by venture capital firms and similar entities in calendar year 2001 as measured by the "PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree Survey" (www.pwcmoneytree.com).

Companies in the start-up stage of development may have been in business for only a few months. Companies in the early stage of development have generally been in operation less than 24 months. At minimum, all companies have a fully developed business plan, a dedicated management team and extraordinary potential for rapid growth.

These fundings represent the first time a company receives financing from a professional venture capital firm in exchange for equity. Prior to obtaining venture capital, a company generally has received financing from the owners, employees, friends, family or incubator or angel investors, and may have taken on debt.

Note: Due to a 56-way tie for No. 71, there are actually 126 firms in our listing.

Reality Check

Find out who's really getting their hands on venture capital in this tough marketplace.
By Kirk Walden

With the slide in overall investing in the first quarter of 2002, it would be easy to conclude that companies looking for their first round of venture financing are being hit hardest as venture capital firms focus on companies in which they have already invested. But that's not the case.

The number of companies receiving venture capital for the first time did drop in the first quarter. (See the chart below.) But as a percentage of the total number of deals, first-time financings accounted for around 24 percent--about the same as past quarters. Further, companies that did get funding got more of it. The average capital amount per company has been steadily increasing over the past three quarters.

Of course it helps to be in the right industry. Venture capital tends to be tech-centric, and software remains the most popular industry by far. On the other hand, networking has stalled, telecommunications has fallen out of favor, and information technology services is nearly nonexistent. More traditional industries like consumer products, business products and retailing have settled down around typical historical levels.

It's a demanding environment for the entrepreneur, but those who succeed are rewarded with more funding and fewer market competitors than the conventional wisdom proffers.

Kirk Walden is the director of venture capital research at PricewaterhouseCoopers.

Tracy T. Lefteroff is the global managing partner of the Venture Capital Practice for PricewaterhouseCoopers.