What's perhaps surprising is that venture funding in Austin may slow even more in 2002, according to Angelos Angelou of Angelou Economic Advisors. That's another piece of unwelcome news for Austin's real estate community, among others. It means there will be fewer startups to eat up the glut of office space now on the market and coming online in the next two years.
So far in 2001, Austin companies have raised $943 million in venture capital. "So we may be able to exceed a $1 billion in venture capital this year, a year which was not very kind to IPOs and the venture capital market," Angelou says. Then he adds, "Here's my fear: Next year we're not going to be able to get these numbers. Next year we're going to see the brunt in the decline in those numbers. I'm quite certain of it."
Angelou's remarks on venture capital were part of a presentation he made this week on Austin's economy and real estate market to the Central Texas Commercial Brokers Association. His certitude comes, Angelou says, from conversations with venture capitalists who've said they are making fewer early round investments.
Venture firms have made few first-round investments this year. Seed-round and first-round investments accounted for $122.8 million of the total $700.8 million venture investments made through Sept. 30, according to PriceWaterhouseCoopers.
Instead, investors have concentrated on helping the surviving companies in their portfolios grow. Later round funding usually brings in more cash as companies spend on manufacturing their products and selling and marketing them.
On Tuesday, Surgient Networks Inc. added $18 million to its second round of funding, bringing its total venture investment to $85 million. Earlier in the week, AGEA Corp. landed $12 million in its second round.
While Angelou expects venture investment to decrease in 2002, he says it probably will be better spent than the investments in dot-com companies. "The good news is that it's not funding software or dot-coms anymore," he says. "It's funding profitable companies.
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