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Down, But Far From Out

If you thought venture capitalists had wearied of all things related to the Internet, think again. Despite the beating e-commerce and content outfits took in the public markets last year, VCs still poured $5.52 billion into such companies during the fourth quarter, according to figures from Venture Economics and the National Venture Capital Assn. In all, Internet-related deals swallowed $7.93 billion in the last three months of 2000 -- more than any other industry, including communications, software, or biotechnology.

Of course, those figures don't approach the overheated volume of a year ago. In the last three months of 1999, e-commerce and content companies captured $9.5 billion in venture capital, and all Internet-related deals took in $11.8 billion.

MORE CAUTIOUS. There are other signs of a slowdown as well. On the whole, fourth-quarter VC investments totaled $19.6 billion, down from $28.3 billion in the third quarter and the lowest level since the third quarter of 1999. At the same time, VCs grew more cautious, concentrating more than half their fourth-quarter investments in expansion-stage companies. Startups and early-stage companies, by contrast, absorbed just 23% of the cash.

One likely explanation: With the IPO markets depressed, VCs are left without a quick exit strategy. So they're concentrating most of their time and money on companies in which they've already invested. For entrepreneurs looking for first-time capital, that made the last few months of 2000 a lonely stretch. By Julie Fields in New York

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