After record year, venture capital industry positioned for a healthy future

Business Wire, April 16, 1997

WASHINGTON--(BUSINESS WIRE)--April 16, 1997--As its annual meeting commences, The National Venture Capital Association (NVCA) Wednesday released its 1996 Annual Report.

The report, which is produced by VentureOne, the leading investment research firm serving the venture capital industry, shows that venture capitalists expanded their investment in entrepreneurial companies in 1996 because of:

-- increasing confidence among institutional investors in the

venture capital industry;

-- high returns and liquidity from primary existing strategies

(IPO market and mergers & acquisitioins);

-- increasing numbers of promising technology-driven

entrepreneurial companies.

Highlights from the report include:

-- venture capitalists had record success in raising money from

institutional investors (pension funds, foundations, etc.) in

1996, raising $6.6 billion in 1996 -- up from $4.7 billion

in 1995 (a 41% jump);

-- over $10 billion was distributed by venture capitalists to

1,500 entrepreneurial companies in 1996 -- a 35% gain over

the prior record of $7.4 billion in 1,100 companies in 1995;

-- 260 venture-backed companies raised $11.8 billion in the IPO

market in 1996 -- a 44% increase over the total amount raised

by the 204 venture-backed IPOs of 1995. In addition, the

$11.8 billion raised by venture-backed represents

approximately 30% of all money raised from the IPO market in

1996.

-- over 155 venture-backed companies were acquired in 1996 --

21% higher than acquisitions reported in 1995;

-- high-tech companies (information technology, hardware,

software, electronics, communications) received 60% of all

dollars invested -- up from 48% in 1995 and 1994;

-- the life sciences sector (biotechnology, healthcare, medical

device) received 22% and non-technology (retail and consumer)

and non-categorized companies received 18%.

The report paints a positive picture for venture capitalists and entrepreneurs for the years to come. The continued increase in money raised by venture capitalists from institutional investors indicates that future disbursements to entrepreneurial companies should remain strong.

As long as IPOs and acquisitions remain viable exit strategies, venture capital returns should remain healthy. New technologies and rapidly growing new industries continue to provide excellent opportunities for both venture capitalists and entrepreneurs.

"Based on these figures, it appears that the venture capital industry is well-positioned to prosper into the next century. The fact that the industry is well-financed and entrepreneurs and emerging industries continue to provide excellent investment opportunities indicates that the venture capital community will continue to foster the creation of new jobs, innovation and economic growth," stated Brian Dovey, president-elect of the National Venture Capital Association.

"In the midst of a record year, two very interesting things took place. The first is the increase in information technology investments, accounting for 60% compared to the historical 40% of total investments. As technology extends its reach into our daily lives, the percentage of technology related investments continues to rise. The second event is an amazing level of acquisition activity as corporations look to purchase emerging technologies and further their market positions. Venture-backed acquisitions increased by 120% over the previous year providing a very robust exit route for venture capital investors," stated Rolf Selvig, director of business development for VentureOne.

The National Venture Capital Association (NVCA) is comprised of approximately 240 venture capital organizations who manage over $35 billion of private equity capital.

The NVCA was founded in 1973 to foster a broader understanding of the importance of venture capital to the vitality of the United States economy, and to represent the public policy interests of venture capitalists and emerging growth companies.

NVCA's affiliate, the American Entrepreneurs for Economic Growth (AEEG), is a nationwide network of close to 10,000 emerging growth companies who employ well over one million Americans.

VentureOne is the leading investment research firm serving the venture capital industry and provides information, consulting and research services to many of the nation's leading venture capitalists, growth companies and related professionals.

CONTACT: National Venture Capital Association

Jeanne Lazarus, 703/351-5269

or

VentureOne

Rolf Selvig, 415/538-2600