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High-Technology Industry Continues to Fuel Record-Setting Venture Capital Investment During the Third Quarter of 1996; $7 Billion in Total Venture-Backed Investments in the First Nine Months of 1996 Surge Close to $7.5 Billion Level Reported for All of 1995.

SAN JOSE, Calif.--(BUSINESS WIRE)--Nov. 22, 1996--High- technology companies led 1996 third-quarter venture capital investments across the United States and drove activity on a pace to far exceed 1995 levels, according to the Price Waterhouse LLP National Venture Capital Survey released today.

Venture-backed investments in high-tech companies during the third quarter of 1996 jumped 50 percent from the same period a year ago, as total venture capital investment activity across the United States for the first nine months of this year surged to $7 billion -- nearly reaching the $7.5 billion reported for all of 1995.

High-technology industries -- from software and semiconductors to medical instruments and computers -- attracted two-thirds of the $2 billion invested during the third quarter of this year and accounted for 70 percent of all companies receiving venture-backed funding. Software investments alone more than doubled from 1995 third-quarter levels.

"Based on the current rate of venture capital investments, 1996 will certainly be another record year," said Donald McGovern, chairman of the Price Waterhouse Technology Industry Group, which sponsors the quarterly poll.

In the third-quarter of 1996, venture capital activity was 25 percent higher than in the third quarter of 1995, although venture capital investments dipped from the record-setting $2.8 billion reported in the second quarter of this year.

"Third-quarter numbers are traditionally lower than second- quarter numbers because deal flow slows considerably in the summer months," said Carl Thoma, president of the National Venture Capital Association and managing partner of Golder, Thoma, Cressey, Rauner Inc. "But the venture capital industry still remains strong. Good deals are being made across the country in all industries."

Start-up Companies Lead Surge

Companies in the start-up/early stages attracted the greatest level of venture capital investment -- collecting approximately $600 million of the $2 billion total and 46 percent of the 444 companies receiving funds. Of all start-up/early stage companies, software and communications firms grabbed nearly 56 percent of that $600 million. On average, each start-up company received more than $3.1 million in funding.

Start-up/early stage investments dominated the biotechnology and medical instruments industries, indicating significant long-term commitment in those categories. Within biotechnology, nearly 80 percent of all funds went to companies in the start-up stage. In the medical instruments and devices category, 70 percent of the funds went to early-stage firms.

Funding for Internet-related companies continued at the high level set in the second quarter of 1996. The 62 Internet companies that received funding in the third quarter of this year is more than six times greater than in the third quarter of 1995.

Investments Expand Beyond Traditional Regional Strongholds

Third-quarter venture investment activity continued to expand throughout all regions of the United States. Two-thirds of all funds invested went to companies outside the traditionally dominant Silicon Valley and New England areas. Eight of the 17 major U.S. regions collected more than $100 million in investments, and the Southeast jumped ahead of New England to claim second place.

Silicon Valley again led all other U.S. regions, with 121 firms -- nearly 28 percent of all companies nationwide -- securing $458 million in funds. This represents a significant increase over the third quarter of 1995, when 74 Silicon Valley companies received $351 million in investments.

"The geographical diversity of investments is especially encouraging," McGovern said. "States like Florida, Texas and Illinois all attracted significant investments."

Price Waterhouse survey participants included 369 venture capitalists, with those making investments identifying 151 co-investors, reflecting activity of a total of 520 venture capital firms.

Price Waterhouse LLP National Venture Capital Survey

Endorsed by the National Venture Capital Association (NVCA) and the National Association of Small Business Investment Companies (NASBIC), the Price Waterhouse National Venture Capital Survey, conducted under the sponsorship of the Price Waterhouse Technology Industry Group, has been administered quarterly to firms that act as sources of venture capital financing.

The survey tracks investments in companies by venture capitalists nationwide and represents more than 15 industries.

The Price Waterhouse Technology Industry Group assists innovative and fast-moving companies in the life sciences; networking and communications; semiconductor; software and computers; and peripherals industries. These business advisors have experience in helping domestic and international companies in all stages of growth.

For nearly 150 years, Price Waterhouse LLP has helped the world's leading companies solve complex business problems. Today, through a worldwide network comprising 53,000 professionals in 119 countries and territories, Price Waterhouse LLP assists clients in implementing strategies to improve business performance; effecting organizational and strategic change; using information technology for competitive advantage; and meeting audit and tax requirements.

Comprehensive Price Waterhouse LLP National Venture Capital Survey data is available on-line via the Internet at the Price Waterhouse website:

CONTACT: Price Waterhouse LLP

Kirk Walden, 214/754-8927


Ketchum Public Relations

Jeremy Kehoe, 415/984-6313
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Publication:Business Wire
Date:Nov 22, 1996
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