Underhyped and loving it, that’s the Internet, the number one investment
for venture capitalists in many cases.
For the first time ever at our request famous accounting firm Price
Waterhouse broke out its special abacus and tallied up the number of
Internet dollars and deals for the past three years and presented the
startling results at Spring Internet World.
Here’s our exclusive snapshot:
Follow The Money: 1997 vs. 1996 Internet Venture Capital
Internet Venture Capital | 1997 | 1996 | % change |
Investment Survey | (millions) | (millions) | |
Dollars invested | $ 1,880 | $ 926 | 103% |
Number of deals | 422 | 262 | 61% |
Internet investment | |||
by segment | 1997 | 1996 | % change |
Software | $ 733 | $ 344 | 113% |
Services | $ 518 | $ 290 | 79% |
Infrastructure/Access | $ 485 | $ 216 | 125% |
Content | $ 144 | $ 76 | 89% |
TOTAL | $ 1,880 | $ 926 | 103% |
AVERAGE | $ 470 | $ 232 | 103% |
Presented as a world exclusive debut at Spring Internet World, Capital
Connections session.
) 1998 Price Waterhouse
Some $1.8 billion rolled into future Net hopefuls, wannabes, and plain old
dreamers looking to be the next big thing. Just when you think that
Microsoft holds back anyone from foolishly betting on software, guess what?
Software was the number one area of investment with $733 million being
outlaid by venture firms nationwide (see table).
Biggest growth in percentages came from infrastructure/access as the
underlying fundamental backbone, and technology is always trying to stay
two steps ahead of the exponentially growing traffic and demands. Bandwidth
demand doubles every few months so anything that makes faster access is
scorching hot.
Squeaking onto the list but showing strong growth was content that jumped
89% in dollar volume to $144 million vs. 1996. This area presents VCs with
a tremendous challenge since content, while king, is not a traditional
venture investment vehicle. VCs prefer widgets and wadgets rather than
words and pictures or sounds to invest in.
Although we don’t present a table on stage of investment, we’ll summarize that
in 1996 most of the dollars invested–67%–went to startups or seed
stage firms. By the next year that percentage dropped to 50%, with expansion
taking a 37% chunk of cash.
Was the money trail democratically dispersed? Nope. California dominated
the deal flow with 220 deals and $1 billion of the pie.
Top 10 Dollar Deals
1997 Top Company Deals | Invested |
(millions) | |
Juniper Networks | $ 50 |
DoubleClick Network | $ 40 |
IXL Holdings | $ 30 |
Lightspan Partnership | $ 26 |
Healtheon | $ 25 |
Zip2 | $ 25 |
Epoch Networks | $ 23 |
Live Picture | $ 22 |
Home Financial Network | $ 22 |
Exodus Communications | $ 21 |
TOTAL | $ 284 |
AVERAGE | $ 28 |
TOTAL $ % OF ALL DEALS | 15% |
) 1998 Price Waterhouse
Massachussets was second, a distant second that is, with 48 deals and $224
million invested in them. The results show a shift to a U.S.-wide
phenomenon, however, as the Net makes location less important. A good idea
has wings, especially with the Web.
Many of the deals fell under the $5 million mark, but our own analysis of
Price Waterhouse’s survey results indicates that the top 10 deals in dollar
value accounted for 15% of all deal dollars.
So the next time you see a headline that says the Net is hyped, check the
money trail and see where the billion dollar bets are–on the Internet.
