Venture-Capital Funds Saw
Slight Uptick in 1st Quarter

ARLINGTON, Va. -- Performance of venture-capital funds remained weak through the first quarter of this year though there was a slight uptick, according to data released by Venture Economics and the National Venture Capital Association.

For the 12 months ended March 31, the average venture investment was off 24%. That is a slight improvement from the one-year drop of 28% reported at the end of last year.

The modest improvement may reflect some strength in the public markets for life-science companies, but isn't particularly significant, said John Taylor, vice president of research at the NVCA, a trade association. Venture Economics, a venture research firm, is based in Newark, N.J.

Mr. Taylor said he doesn't expect much change in venture returns until big companies resume spending enough on technology to allow start-ups to start making sales and profits. Only then will small companies be attractive enough to the public markets and potential acquirers that venture capitalists will be able to sell their stakes and provide some returns to investors.

Funds devoted to investments in very young companies remain the hardest hit in the venture world with early-stage funds off 32% for the 12 months ended March 31. That may be due to a growing number of start-ups "withering on the vine" because they can't raise new money, Mr. Taylor said.

Updated August 8, 2002