490 P. Gompers
Ta b l e 2
Number and dollar amount of venture capital disbursements in the U.S. in the first three quarters of 1999, by
VentureOne industry classification. All dollar figures are in millions of current dollars
Industry Number of
transactions
To t a l $
investedCommunications and networking 255 $4,498
Electronics and computer hardware 59 $423
Information services 296 $3,053
Semiconductors and components 58 $518
Software 489 $4,233
Total of information technology 1157 $12,726
Healthcare services 47 $411
Medical compounds 84 $649
Medical devices and equipment 114 $827
Medical information systems 44 $336
Total of life sciences 289 $2,233
Retail and consumer products 30 $227
Other companies 454 $5,580
Total of non-technology or other 484 $5,807
Grand total 1979 $20,957
Source: Compiled from unpublished VentureOne databases.
retrenchment, many venture capital firms decided to reduce the amount of capital that
they had raised, essentially foregoing commitments that their investors had made to
their funds. As the investment pace slowed, the level of fundraising declined even more
dramatically. While fundraising in the past few years has begun to recover, how far it
rises and whether it reaches the speculative levels of 1999 and 2000 is an open question.
- The venture capital investment process
Venture capitalists typically invest the money in young firms that may be little more than
in the head of a talented engineer or scientist. Most of the firms that venture capitalists
finance have few other sources of cash and many are subject to severe credit rationing. In
order to overcome this capital rationing, however, the control and monitoring aspects of
venture capitalists’ investment process are paramount. Researchers have explored how
the types of contracts utilized, the timing of investment, and the active involvement of
the venture capital investor play important roles in improving the likelihood of success
for the startup company
Tables 2–4present historical information on the mixture of investments.Table 2pro-
vides a detailed summary of investments in 1998;Table 3presents a more aggregated
summary of investments (in manufacturing firms only) over the past three decades; and