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Byline: Cynthia L. Webb

It's no secret that the venture capital market has seen better days. And now matter low VC investing gets in one quarter, it only manages to drop even lower the next. VC investments hit a five-year low during the first quarter of 2003, falling below $4 billion, according to two recent surveys. If you're keeping track, that's 12 consecutive quarters in which VC spending has declined since the 1999 to 2000 heyday.

In the first quarter of 2003, 623 companies nationwide received $3.8 billion in VC funding, compared with 816 deals with a price tag of $6.5 billion during the same 2002 quarter, according to the MoneyTreeSurvey conducted by PricewaterhouseCoopers , the National Venture Capital Association (NVCA) and Thomson Venture Economics . The first quarter figures are also down from $4.3 billion in the fourth quarter of 2002. The most recent annual VC figures look like peanuts compared to the year the bubble burst: $29 billion was invested in 2000.

The MoneyTree survey will be released today. Ernst & Young and VentureOne conducted a similar survey with similarly gloomy results. "The first factor that cannot be quantified is the impact that world events and the Iraqi conflict had on possible investments," Ernst & Young's Don Williams told The Wall Street Journal. Williams added this in a comment to News.com: "Additionally, the first quarter is often an administratively focused period for many of the fund partners as they deal with year-end matters." * The Wall Street Journal: Venture Capital Investing Fell to 5-Year Low In First Quarter (Subscription required) * 1st Quarter 2003 MoneyTree Survey (PDF) * CNET's News.com: VC tech investments slip

The software and biotech sectors remain the sweet spots for VC funding overall, with software firms netting about $790 million in funding during the quarter, according to the MoneyTree survey. The VentureOne survey put software investments at nearly $800 million. John Gabbert , vice president of research at VentureOne, told Dow Jones that even though investments in the sector fell 17 percent, a greater percentage of software firms nabbed first time funding in the first quarter compared with last year's quarters combined. How's that for a silver lining? * Dow Jones/AP via SiliconValley.com: Venture Capital Investments Fall 21 Percent

John S. Taylor , NVCA's vice president for research, stated the obvious to The Washington Post, reminding people that the economy isn't too stellar these days: "It's no secret that these are difficult times, not only in world affairs but in terms of our economy. A lot of factors that have been bringing these totals down . . . are still in play." The Washington region fared a little better than others during the quarter. The Post reported: "Locally, venture investment activity was up slightly ... to $254 million in 51 companies. Software remained the most prominent sector around Washington, accounting for about 45 percent of all deals. Just 131 first-time financings were reported in the first quarter, the lowest total in eight years. New investments are considered an indicator of the industry's recovery because a jump would show that venture capitalists have worked through their post-bubble issues and begun looking at new opportunities." * The Washington Post: Decline In Venture Investment Continues

VC Tour of America

Silicon Valley: The VC drought got worse even in tn the heart of the tech economy, where funding fell 18 percent compared to the last quarter, with only $1.27 billion in deals. The San Jose Mercury News notes: "As usual, software companies got more money than other sectors, with $785.5 million, according to the MoneyTree survey. That accounted for 20 percent of the nation's total, but it was still a 13 percent decline from the fourth quarter of last year. ... In a rarity of good news, semiconductor companies received more money than they did the previous quarter, with $275.3 million." * San Jose Mercury News: Venture funding slides in valley

Austin: In that hot little tech town in Texas, "[t]he average size of Central Texas venture capital investments during the first quarter fell by nearly half from the previous year, although the pace of investment remained constant, according to data released Monday." The Austin American-Statesman reported that [14]Austin companies raised $71 million during the first quarter of 2003" (according to MoneyTree data). * Austin American-Statesman: Venture investment takes a dive (link only good for April 29)

Atlanta: Georgia saw 15 deals during the first quarter worth some $74 million. "During the first quarter, there were no telecom deals in Georgia -- a more accurate reflection of the industry's issues and investors' sentiment," The Atlanta Journal-Constitution said, citing remarks from John Huntz , managing director of Atlanta-based Fuqua Ventures . "But relative to the normal investing pace, I would not say it has plummeted. We are, just as the rest of the country and internationally, in this continual funk," Huntz said. * The Atlanta Journal-Constitution: Georgia Slips In Garnering Venture Capital

Colorado: The Denver Post compared Colorado's VC figures with the fourth quarter for its lead, instead of the year-ago period, and found that investments climbed by 31 percent, according to the MoneyTree survey. "Fourteen Colorado companies, many from the oil and gas and information technology sectors, raked in $152 million in funding in the first quarter. Seventeen firms secured $116 million in the fourth quarter. Total investments were down 32 percent from the first quarter of 2002, when 22 companies received $223 million," the newspaper reported. An article in last week's Denver Business Journal pointed out that many area VCs are eyeing defense contractors for new investments as telecom and other sectors continue to lose their luster. * The Denver Post: Venture Capital Tap Opens A Little Wider * The Denver Business Journal: Venture Capital Starts Flowing Toward Defense

Seattle: The VC picture in Seattle was similar to Denver's up-and-down numbers. "In the first quarter of the year, $126.6 million was invested in 25 Washington state companies, a considerable increase compared with the prior quarter, but similar to the same period a year ago," The Seattle Times noted. * The Seattle Times: Venture-Capital Deals On Par With '97 As Closings Take Longer

Singing Apple's Tune

Apple 's entrance yesterday to the digital music world has sparked a lot of reaction in the news media, market experts and the entertainment industry. The company's new online iTunes Music Store , which will offer Mac and iPod users downloadable songs from a 200,000-song catalog (99 cents a piece or $9.99 for an album), is being watched carefully as the recording industry and other computer companies try to find ways to get consumers to pay for music online -- no easy task given the wealth of free music available on the Internet.

According to The Washington Post, Apple chief Steve Jobs "hailed the iTunes service as a revolutionary answer to the problems facing the music industry, which has seen compact disc sales drop about 7 percent over the past year and online CD sales dive about 20 percent during the same time. The record industry blames online music piracy birthed by the Napster generation. 'Consumers don't want to be treated like criminals and artists don't want their valuable work stolen,' Jobs said. 'The iTunes Music Store offers a groundbreaking solution for both.'" * The Washington Post: Apple's Different Tune * MacCentral.com: Apple Releases iTunes 4, QT 6.2, iPod Update 1.3

The new service might try to embrace independent artists too. "An Apple executive also hinted that the company is thinking about opening the iTunes Music Store to independent labels and artists," The San Jose Mercury News reported. * The San Jose Mercury News: Apple Launches Online Music Store

But will it pay off for the company? "Five or 10 years from now, we may look back and say this was the point of mutation when Apple changed from being a computer company to a digital media company," Raymond James & Associates analyst Phil Leigh told the San Francisco Chronicle. * San Francisco Chronicle: Apple kicks off online music store