NEW YORK (CNNfn) - Undaunted by volatility in technology and Internet stocks in recent weeks, several venture capital firms plan huge new funds that will begin investing in small high technology and Internet companies.|
In just one week, following a period of unprecedented declines for many high technology companies, billions of dollars were raised to fund new high- tech ventures. Venture capital investments have been soaring in recent years, most of them going to high tech companies.
Some analysts expected the flow of capital to venture firms might slow down, particularly in the wake of April's testy markets, but there is no evidence there is a slow down in venture capital funding.
The biggest deals
The largest of the announcements came from General Atlantic Partners, which announced a $1 billion commitment from American International Group Inc. to finance Internet and information technology companies. The billion-dollar deal raised the total amount of funds under General Atlantic's management to $4 billion.
Morgenthaler Partners, based both in Menlo Park, Calif., and Cleveland, announced the closing of its sixth fund -- a $570 million fund to finance Internet, software and health care companies -- on April 14. The amount raised exceeded the $450 million initially targeted by the firm. It was nearly twice the $300 million the firm raised for its fifth fund in 1998.
BA Venture Partners, the venture capital wing of Bank of America, announced a $500 million venture fund focused on broadband and wireless communications, Internet software and services, business e-commerce and biotechnology.
The Carlyle Group announced it has raised more than $660 million for its Carlyle Internet Partners Europe, the venture capital fund that backs European Internet and new media companies.
Several other funds, including Woodside Fund, Aspect Communications, Gazelle TechVentures, and Horizon Ventures, all announced smaller but significant funds to invest in business-to-business e-commerce sites, information technology and application service providers.
Taking a long-term view
Most venture capitalists are shrugging off Wall Street's recent uneasiness about technology and Internet stocks as short-term jitters about a sector that will see many successes in the coming years.
John Taylor, spokesman for the National Venture Capital Association, said venture capitalists are not shaken by the market volatility because they have a much longer investment time frame.
"They are putting money into deals and looking five to eight years out. They're not looking to go public next week," he said, acknowledging that the venture firms may have to be more selective about the deals they do in high technology and Internet. "The VCs who have been around know you can't hire a bunch of people and try to (sell) dog food over the Internet. "
Furthermore, the successful debuts last week of AT&T Wireless (AWE: Research, Estimates) and ON Semiconductor (ONNN: Research, Estimates), a Motorola spinoff, brightened the outlook for profitable companies in the sector to launch a successful IPO.
Increased competition means more service
Even as the venture capital firms fatten up for the future, industry experts say the number of truly viable Internet companies is bound to shrink. All the information points to a much more competitive environment for the venture capital firms.
Venture capital firms recognize the increasingly competitive environment for good deals is going to affect the way they do business. Andrew Weiner, spokesman for General Atlantic, said venture capitalists are going to have to compete on their ability to help their portfolio companies achieve success. General Atlantic, to cite one example of the services it offers, is expanding its presence overseas to help its portfolio companies expand their businesses abroad.
"Just offering them money is not going to be a viable long-term strategy," he said.