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VC funding sags in second quarter

The amount of cash pouring into companies in the second quarter slid about 6 percent, compared with the first quarter, according to a venture capital research company.

    Venture capital flowing into companies has finally begun to slow, according to a new report.

    The amount of cash pouring into companies in the second quarter slid about 6 percent, compared with the first quarter, according to venture capital research company VentureOne. The slight dip apparently reflects the first real effects of this spring's market woes on venture spending.

    Still, venture investments for the first half of the year nearly matched the entire amount spent in 1999. And investments in Internet companies for the first half of 2000 have already exceeded last year's total, VentureOne noted.

    Venture-backed companies raised $17.2 billion in 1,054 rounds of financing during the second quarter, VentureOne said.

    The median amount raised in a round of funding dipped to $11.2 million in the second quarter from $12 million in the first quarter.

    E-commerce companies suffered the most. Investments in such companies were down 32 percent in the second quarter, compared with the first quarter.

    On the opposite end the spectrum were information technology (IT) companies, which actually had their strongest quarter ever, according to San Francisco-based VentureOne.

    Investments in that industry group rose to $10.1 billion, a 10 percent increase from the first quarter. Every segment within IT saw an increase in activity, with communications, information services and software each attracting significant investments. Venture capital investments in IT now stand at more than twice the amount accrued by this time last year.

    "The recent public-market fluctuations led many industry watchers to anticipate an overall drop in company valuations," Sasha Talebi, VentureOne's director of research, said yesterday in a statement. "But in fact, companies in most sectors have weathered the storm and continue to receive financing from their venture backers, as well as valuable advice on adapting their business models to the current climate.''

    Talebi said he believes the investment community will continue to support the Internet, which now receives 86 percent of all investment dollars.

    Investments in other industries, such as health care, lagged. The amount raised for the health care industry in the second quarter was off 36 percent from the first quarter.