Utah's money tree for venture capital shed few leaves last year, as VC companies forked over fewer investment dollars.
A MoneyTree survey compiled by PricewaterhouseCoopers and Venture Economics for the National Venture Capital Association for 2002 shows that Utah companies received less than $95 million in VC money last year, compared with $223 million in 2001.
The top VC investment year for Utah companies was 2000, when $706 million was funneled to startups, entrepreneurs and others.
The number of venture capital deals also was down last year. Twenty-six were completed, down from 43 in 2001 and 64 in 2000.
The report includes various types of VC activities but excludes debt, bridge loans, recaps, initial public offerings, leasing and others. The Utah figures for the fourth quarter and for 2002 do not include an investment in STSN for an undisclosed amount.
"I think what's happened is that we have returned back to normal from the Internet bubble stage," said Steve Stauffer, senior audit manager for PricewaterhouseCoopers in Salt Lake City.
"If you look at numbers prior to the Internet bubble, they're pretty similar to what they are now. The VCs are being more selective in who they're giving money to, and they're taking longer to make investments in the companies.
"Where previously it had taken taken weeks to get a deal done, now it's taking months. They're still giving money, but it's a much harder process."
Stauffer noted that Utah's figures correspond to national trends over the past few years. "We're just on par with the rest of the nation."
Last year's third quarter was the tightest for VC funds, with $4 million invested through three deals. The money crunch eased a bit in the fourth quarter, with six deals totaling $14.9 million. By contrast, the second quarter of 2000 alone had 23 deals totaling $330 million.
Fourth-quarter VC investment included:
$8 million for Echopass Corp.
$113,000 for emWare Inc.
$3.5 million for Ingeo Systems.
$3 million for Fatpipe Networks.
$300,000 for Soronti Inc.
The undisclosed amount to STSN.
Of the $94.6 million in deals completed last year in Utah, $57.5 million was invested in software companies. That was followed by $21 million for telecommunications, $10.7 million for networking and equipment, $2.7 million for biotechnology, $1.5 million for media and entertainment, $1 million for information technology services and $300,000 for computers and peripherals.
Utah's average deal size has slipped from $11 million in 2000 to $5.2 million in 2001 to $3.7 million last year — again following the national pattern.
"There are still a lot of opportunities out there, and companies are looking for money, but it's more difficult to get that money," Stauffer said. "I think things have returned to normal. The Internet bubble was abnormal, but basically we've returned to the way things should be. Things will probably get better as the economy gets better, but I don't think we'll see the level of investment we saw in 2000."
On the national front, VC investment was at its slowest pace in nearly five years during 2002 as the limping industry continued to pick up the pieces from the high-tech crash.
The national MoneyTree report pegged fourth-quarter investments at $4.2 billion, a 49 percent drop from $8.2 billion at the same time in 2001.
That was the same amount as the first quarter of 1998, when venture capitalists also anted up $4.2 billion.
A separate study distributed Monday by Ernst & Young and industry research firm VentureOne came up with slightly different numbers but reached the same conclusion — venture capital is trickling at the slowest rate since the first quarter of 1998.
For all of 2002, venture capitalists invested $21.2 billion, the lowest full-year sum since 1997's total of $15.5 billion, according to the PricewaterhouseCoopers/Venture Economics study.
While analysts say it's unlikely venture capital investments will fall much below 1997's level, "There is nothing out there that says things are going to improve this year," said John Taylor, vice president of research for the National Venture Capital Industry.
Venture capitalists still have an estimated $85 billion of uninvested funds, raised largely during the dot-com boom. That's enough money to last five years if things continue at the same investment pace as 2002's fourth quarter.
Last year's total was just slightly below the $21.5 billion invested by venture capitalists in 1998 — the early stages of the dot-com mania that elevated the high-tech industry to dizzying heights.
Contributing: The Associated Press
E-mail: bwallace@desnews.com