Filed at 12:16 a.m. ET

SAN FRANCISCO (AP) -- Venture capitalists continued to tiptoe through the high-tech wreckage in the second quarter, sending investments in start-ups to the lowest level in nearly four years, according to an industry report to be released Tuesday.

The $5.7 billion of venture capital invested in the second quarter represented the industry's lowest three-month volume since the quarter ended in September 1998, according to a survey by PricewaterhouseCoopers, Venture Economics and the National Venture Capital Association.

This year's second-quarter investments -- disbursed to 819 companies nationwide -- fell 53 percent from the same time last year when venture capitalists doled out $12 billion to 1,376 companies, the survey said.

Venture capitalists have been backpedaling since the market values of tech companies peaked with the Nasdaq composite index in March 2000. The $5.7 billion invested by venture capitalists during this year's second quarter is 81 percent below the record $29.5 billion invested in start-ups during the first three months of 2000.

Most venture capitalists expect the industry's doldrums to continue for the foreseeable future.

``We still have a long period of pain and ugliness in front of us,'' said Mark Saul, a general partner with Foundation Capital in Menlo Park.

Hundreds of start-ups and a large number of venture capital firms are expected to fall by the wayside during the anticipated turmoil.

With little hope of taking a high-tech start-up public in today's climate, venture capitalists are pouring more resources into their existing portfolio of companies.

Two-thirds of the venture capital invested in the second quarter went into so-called ``expansion stage'' companies -- typically start-ups that need a third or fourth round of financing to stay alive.

The triage is ``a lot of hard work,'' said Ted Dintersmith, a general partner with of Charles River Ventures. ``Not many venture capitalists are having a relaxing summer.''

The sharpened focus on saving the best start-ups created during the past few years is making it tougher on entrepreneurs trying to bring new products to market today.

San Francisco-based Typesoft had to delay its plans to introduce an electronic text pad in May when venture capitalists reneged on a verbal promise to invest $3 million, said Rod Stambaugh, the company's chief executive.

Stambaugh hasn't been able to interest other venture capitalists in the company, even though Typesoft has lined up deals with several major retailers, including Target and Office Depot, to sell the text pad.

With no money to back Typesoft's concept, Stambaugh said he and the company's three other employees have gone into ``hibernation'' in hopes of raising some venture capital by October.

Venture capitalists' reluctance to fund entrepreneurs with fresh ideas could come back to haunt the country in a few years, said Chris Bruner, who leads Ernst & Young's venture capital advisory group.

``If new companies aren't being fed into the pipeline, there may be a long-term impact on future economic development,'' he warned.

As they shift their focus from high-tech companies, venture capitalists are paying more attention to health services.

Venture capitalists poured $1.5 billion into companies making biotechnology and medical device products, the survey found. That represented roughly one-fourth of the second quarter's total venture capital investments -- the highest percentage earmarked for the life sciences sector in five years.

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