Venture-Capital Funding for Small Companies Plunges
VENTURE INVESTING in small firms continues on a downward spiral.</br></br>Venture-capital funding for small companies plunged 66% in the first quarter, industry researchers report.</br></br>Investments declined to $185 million from $539 million a year earlier, says Venture Economics Publishing Co., an industry research concern in Needham, Mass. The number of companies getting funds slid to 173 from 333. With the decline continuing in the second quarter, venture capital for small companies could sink below $1 billion for 1991, less than half 1990's $2.1 billion, Venture Economics says.</br></br>"The downward trend in venture investing has intensified," says David Schutt, editor in chief of Venture Economics. He says big institutions, disappointed by recent returns, are scaling back their involvement in venture funds. Only 15 venture-capital funds raised money from investors in the first half of this year -- a combined $541 million, off 43% from $954 million a year earlier.</br></br>Analysts say the recession has also slowed the flow of money, as venture capitalists negotiate bargain prices for stakes in struggling concerns.