Reality Check

What does that mean for companies seekingfinancing? The number of businesses receiving early-stage fundingdropped from 453 in fourth quarter 2000 to 235 in first quarter2001, a 48 percent decline. Yet the median dollar amount eachbusiness received fell only 13 percent, from $10.9 million to $9.5million per company (see below for first quarter investments forthe last three years). So while it's more difficult forcompanies to get backing, those that do, get plenty of it to growrapidly. Plus, industry sectors like networking,telecommunications, consumer and business services and softwarecontinue to attract huge amounts of funding compared to mid-1990slevels.

The dramatic drop-off in investingdoesn't necessarily indicate a significant economic downturn.Setting aside the Internet gold rush of the last two years, thecurrent climate is still more aggressive than historical norms andwill likely remain that way. The bottom line is that entrepreneursneed more than just a new idea to get funding.