It appears that a free-fall in U.S. venture capital investing occurred in the fourth quarter of 2001, according to investment research firm VentureOne.

Venture-backed companies raised US$6.3 billion in 610 financing rounds. ThatÕs down 4% and 3% from the third and fourth quarters. The annual totals for 2001 are a far cry from those of 2000 of 2,780 financings. 2001’s deal volume was less than one-half that of the previous year, and the US$32.1 billion invested in 2001 was roughly one-third of the 2000’s US$91.6 billion.

“Yet venture-backed companies received more investment in 2001 than in any year prior to 1999, and the absence of multi-billion dollar declines in the fourth quarter suggests that we may have seen the bottom of the curve,” says VentureOne.

Dave Witherow, president of VentureOne, is upbeat about the quarter’s results and what they signal for the year ahead. “As the boom ended in the spring of 2000 and venture activity began to slow, the question was whether the industry would shrink below pre-bubble levels, especially after the catastrophic events of September 11. But our latest research suggests that the venture capital industry may be stabilizing above the levels that
preceded the Internet boom.”

According to Witherow, “If financing continues at the current pace, we’ll have a healthy $25 billion-a-year- industry in 2002 that will provide ample fuel for the nation’s best new entrepreneurial ventures.”

Overall, only 23% of the amount invested in 2001 went to early-stage startups, compared with 36% the previous year. The percentage of deals completed by these companies fell from 55% to 36% during the same time period.