Survey: 1997 Internet Investments Totaled $1.88 Billion
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Venture capital investment in Internet companies surged to a record $1.88 billion in 1997, according to a Price Waterhouse survey released today.
The figure represents a 1300% increase from 1995's $134 million spent in Internet-related funding. Total venture capital funding throughout all industries rose 34% overall in 1997 to $12.8 billion.
The survey names the Internet field as the fastest growing of all industry segments.
"In terms of number of companies, the Internet segment was up 61% compared to 26% for all other industries," said Susan Gore, Price Waterhouse Internet partner. "Clearly, the Internet is one of the key drivers of investment growth overall."
But does this mean overexposure for the industry? "At the end of 1996, many experts were questioning if the Internet space was already saturated," said Gore. "The resounding answer is no. Both the total dollars and the number of companies increased dramatically."
Though the number of Net start-ups climbed in 1997, the survey found that they comprised only 50% of the companies that secured investment this year, down from 64% last year. The real news was in funding for established companies; investment here jumped to 37% in 1997, up from 14% in 1996.
"This is a natural shift," commented Gore. "With product development and business cycles so short, a company that got its first round of financing in 1996 can easily be in the expansion stage with third round in 1997. This accelerated pace characterizes the Internet market as a whole."
California and Massachusetts were found to be the hottest hubs of Internet development with regard to dollars invested and number of Internet companies. The top ten geographical areas included Colorado, New York, Texas, Pennsylvania, Minnesota, Virginia, and Georgia.
The survey also divided Internet investments according to four categories: access/infrastructure, software, content, and services. It found no significant changes among them during the 1996-97 period.
"This demonstrates that the Internet is moving en mass," Gore said. "No single factor is driving the industry. This isn't really surprising considering the inter-dependency of the technologies and the amorphous nature of the category."