What Rate Hike?
Small companies are feeling the pinch of the Fed's interest-rate hikes, according to the latest survey of the National Federation of Independent Business. Between September and October, average short-term rates paid by small companies climbed 0.4 percentage points, to 9.6%, according to the 1,334 companies surveyed. The net percentage of companies with higher rates (those reporting higher rates minus those reporting lower ones) rose one point from the previous month to 13%. But the rate hikes haven't discouraged borrowing: 33% said they borrowed funds during the month, up four points from September. What's more, the rate increases have had little effect on credit-card rates. There are actually more cards charging less than 10% than there were when frontier last looked at small-business cards this summer.
Where the Money Goes
For venture capitalists, high tech is where the action is. That's the message behind the staggering increase in U.S. venture-capital investment in the third quarter. According to PricewaterhouseCoopers' third-quarter MoneyTree Survey, venture capitalists crammed $9.04 billion into 993 companies, up 18.3% from last quarter. Average funding per company soared 70%, to $9.1 million.
But the rise masks the very picky nature of this boom. Tech companies, especially Web ventures, took nearly 90% of the money. Many venture capitalists are even bidding against one another for such deals. "It's much more of an auction environment," says Chicago venture capitalist Steven Lazarus. Just don't get cocky: Profit Dynamics, a Fountain Hills (Ariz.) research firm, says the overall odds of getting funded are just 1 in 7.
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