The National Venture Capital Association is projecting roughly $8.4 billion in funding for new ventures in 2003. That’s about $3 billion more than last year. Total VC investments may stay at 2002’s $21 billion level, but less of it will be needed for follow-up investing in existing companies. To put those numbers in perspective, venture-capital investing swelled to $106 billion in 2000, an amount that NVCA president Mark Heeson never expects to see again. Back then, the VCs funded just about anything, only to discover they couldn’t get their money out when the IPO market dried up.
After two years of throwing more money at already-funded stragglers and folding some bad bets, firms are finally looking for new deals. “We’re well ahead of last year,” says Steve Bowsher of InterWest Partners in Menlo Park, Calif. His company has seven deals in the works.
Who’ll get the cash? Not kids who still have to show ID to get a beer. The VCs say they are targeting seasoned business people with niche companies in “green field” spaces–those not already occupied by the Ciscos of the world. Biotechnology, wireless communications and security (of both the Internet and real-world variety) are especially attractive.
