Survey: VC funding may not rise till 2002

In a sign of the poor investing times, more than 60 percent of 200 venture capitalists say they doubt funding levels will increase before early 2002, and only a handful expect their companies to go through an IPO, according to a recent survey.

That echoes recent figures. Last year, venture investments dropped for three consecutive quarters, as of the fourth quarter. That's a trend that hasn't been seen for at least five years.

Only 1 percent of the venture capitalists surveyed by accounting-and-consulting giant Deloitte & Touche believed they would cash out of a company via an IPO. The vast majority of survey participants, 95 percent, said their most likely path for exiting an investment in a company was through a merger or acquisition, according to the survey released Friday.

"What's disappointing about these results is the venture capital community has played a pivotal role in driving the economy in California and the U.S.," said Kirsten Richter, a managing director with Deloitte & Touche. "So to the extent that those executives who are making investment decisions do not plan to increase their investments until 2002, that will have a significant impact on the economy."

But despite the anticipated slowdown, some tech sectors are expected to remain stable or increase. Network hardware and software, wireless and telecommunications, and enterprise-software companies are expected to continue attracting venture investments, according to the study.

New Edge Networks, a national broadband provider, is one such example. Earlier this week, the company announced it received a $40 million fourth round of funding from GS Capital Partners III, Crosspoint Venture Partners, Greylock and Accel Partners.

Internet-related companies, however, may not fare as well. Sixty-one percent of the respondents said Internet companies would receive less funding this year, according to the survey.