According to a study released today by PricewaterhouseCoopers, venture capital funding in the United States increased nearly 150 percent to $35.6 billion (US$) last year, with Internet-related companies drawing 56 percent of that total.
The annual Money Tree survey starkly illustrates the shift in the American economy from manufacturing to technology and services, revealing that annual investments in non-technology companies actually declined for the first time in recent memory.
“Internet-related companies offer so much potential so quickly, they are attracting a dominant share of investing,” said Paul Weaver, chairman of the company’s Global Technology Industry Group.
Over 4,600 companies in the U.S. received venture capital funding last year, with the average funding per company totaling $8.9 million, up from $5.2 million the year before.
Brovken down into quarters, the survey demonstrates the meteoric increase in venture capital funding in the last year alone. For the fourth quarter of 1999, the total of $14.69 billion invested eclipsed the total amount of money raised in the U.S. for all of 1998, the company said.
As expected, the technology-rich areas of Silicon Valley in California and New England benefited the most from the increases. Silicon Valley companies raised $13.4 billion, far ahead of the New England region’s $4.1 billion.
New York-area companies raised $2.5 billion, with the Southeast and Los Angeles/Orange County both breaking the $2 billion mark.
B2C Leads Way
PricewaterhouseCoopers said that business-to-consumer (B2C) e-commerce sites led the way in attracting capital, drawing $4.46 billion, an increase of over 1,000 percent from 1998. Business-to-business (B2B) sites gained 908 percent more than the year before, and access and infrastructure companies pulled in 547 percent over 1998.
Software industry companies attracted some $6.6 billion last year, the survey shows, while telecommunications companies drew $5.2 billion and business services companies pulled in $4.6 billion. The business services sector growth was fueled by the increase in Internet consulting, Web site development and hosting and online advertising companies, the survey showed.
Finally, the survey said that start-up companies or first-stage companies attracted some 42 percent of the total venture capital funding for the year. The average start-up received $7.5 million.
Companies in the expansion stage drew $11.4 billion and an average of $10.6 million apiece.