Venture-capital investments in early-stage U.S. companies increased ever so slightly last year. That's the latest news from VentureOne, a venture-capital-industry research firm in San Francisco. Some highlights from VentureOne's 1993 data:
VCs threw just over $1 billion at start-ups last year: $1,063,700,000, according to VentureOne. That was 4.6% more than in 1992 -- and 67% more than in 1991, when overall venture-capital investing hit a low. Last year the hottest industries for start-up investments were medical compounds; software and information services; and computer communications and networking -- a list that was virtually the same in 1992.
While the number of VC deals with start-ups shrank a little bit last year, from 303 in 1992 to 298 in 1993, those deals accounted for 35% of venture capitalists' deals with entrepreneurial companies, up slightly from 34% in 1992 and 32% in 1991.
One of VentureOne's most significant findings is that the average pre-investment valuation that venture capitalists gave start-ups in 1993 was up nearly 50% over the 1992 level, rising to $3.1 million from $2.1 million. "What is surprising is that it's taken this long to happen," says VentureOne's David Gleba, adding that the "frothy" initial-public-offering market of the past three years has led many entrepreneurs to push for higher valuations in their private-financing rounds. "You've got entrepreneurs running into VCs' offices, arguing that they'll be able to take their companies public for $100 million in a year and therefore want investors to come in at a higher level," says Gleba.
-- Alessandra Bianchi* * *
Venture-Capital Investments in Start-up Companies
1991 1992 1993
Number of start-up deals 243 303 298
As a percentage of allentrepreneurial investments 32% 34% 35%
Amount (in millions) $638.1 $1,017.0 $1,063.7
Source: VentureOne, San Francisco, 1993. Start-up investments are those classified as seed or first-round financings.* * *