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Tech Industry

VC interest in Net companies soars

Venture investments in Net-related companies doubled to $1.88 billion in 1997 from the previous year, according to a new survey.

"Who will buy?" Just about anybody, if you're an Internet company.

Venture capital investments in Net-related companies doubled to $1.88 billion in 1997 from the previous year, according to the Price Waterhouse National Venture Capital Survey. Last year's increase was 1,300 percent, compared with $134 million in investments for 1995.

"At the end of 1996, many experts were questioning if the Internet space was already saturated," Susan Gore, Internet partner in the San Jose office of Price Waterhouse, said in a statement. "The resounding answer is no. Both the total dollars and the number of companies increased dramatically.

Total venture capital investments reached a record $12.8 billion last year, up one third from a year earlier. The Net investments outpaced those of other industries, according to Price Waterhouse.

"As a grouping, Internet dollar investments increased 103 percent, vs. 27 percent for all other industries, including high-tech investments," Gore said.

California had the largest number of Internet companies, followed by Massachusetts. Other states in the top ten included Colorado, Georgia, New York, Minnesota, Pennsylvania, and Virginia.

VC firms funding Net start-ups that went public are generating healthy returns, thanks to the run-up in Net stocks. One example: Kleiner Perkins Caufield & Byers, whose investments include Amazon.com (AMZN), @Home (ATHM), Concentric Networks (CNCX), and Preview Travel (PTVL). Another is Sequoia Capital, which funded Yahoo (YHOO).

In addition, Accel Partners said yesterday that Microsoft (MSFT), Compaq Computer (CPQ), Lucent Technologies (LU), Nortel, and Sega chairman Isao Okawa had agreed to invest in its Internet Technology Fund II, a $35 million component of Accel's new $310 million fund base. This marks the first time that Microsoft, Lucent, and Nortel have invested in a U.S. venture fund.