Venture capital creating jobs, despite slump

SAN FRANCISCO: The churn of pink-slips from the dot-com implosion has left a

misleading impression of venture capital, which has been a major force for job

creation over the past 30 years, according to a study released this week.

Even as the Internet sector, which drew billions in venture financing,

capsized in 2000, venture-backed companies as a whole represented 3.3 per cent

of the all jobs in the United States in that year and 7.4 per cent of gross

domestic product, the National Venture Capital Association said.

Comparable 1999 figures were not available. "Venture capital has been

very important in creating jobs and capital far beyond the dot-com cycle, which

is when most people started to notice venture capital," John Taylor, the

group's vice president for research, told Reuters.

But venture capitalists, burned by failed dot-com start-ups, continue to draw

attention for the way they are slowing investments from last year's record pace.

According to NVCA and Venture Economics, venture capital investing in the first

quarter 2001 fell 56 per cent to $11.7 billion from last year's first quarter

figure of $26.7 billion.

Also, only 1,072 companies were funded in the first quarter, the lowest level

in two years, the trade group and Venture Economics said earlier this week. But

according to Taylor, venture capital investments will continue to a big

contributor to job growth this year.

"A lot of funds that had gone light on health-care and biotech are

coming back in," Taylor said. "The software industry is attracting a

lot of attention right now, and some consumer areas are starting to get

noticed."

(C) Reuters Limited 2001.