Steady Flow for Start-Ups

By Barbara Kiviat

Venture capital investment in the U.S. is steadying after three years of sharp decline. Though the $4.2 billion invested in start-ups in the third quarter dropped 4.4%, this is the lowest year-to-year quarterly decrease since the industry peaked in the first quarter of 2000, when $28.6 billion was invested. "It was an unhealthy level of investment in 1999 and 2000," says the National Venture Capital Association's Jeanne Metzger. "Now we've leveled off comfortably, at about $4 billion a quarter." Biotech is the main beneficiary, having received $873 million in the third quarter, unseating software and reaching the top for the first time in seven years. New money has been slow to flow into venture-capital firms, but that shouldn't hurt young companies hungry for funding. The venture capitals didn't lose it all in the bust. They are still sitting on $84 billion in capital.