It was fun while it lasted: Computer engineers talking about business models, money-losing businesses getting millions in funding, new economy start-ups ready to take over the world.
But start-up technology companies soon will have to start looking elsewhere for funding rather than approach venture capitalists. Money is, indeed, drying up.
A handful of technology companies in Orange County got funding in the fourth quarter of 2000. According to the PricewaterhouseCoopers LLC Money Tree Survey done in partnership with Reuters Group PLC’s VentureOne, only 15 companies received financing, compared with 16 in the third quarter and 23 in the second quarter of 2000. The average funding OC start-ups received also dropped, from around $13 million in the third quarter to some $11.0 million in the fourth.
Irvine-based Access360 led the pack in the amount of funding it received. The network software start-up received $41.5 million from Oracle Corp., Verisign Inc., Amerindo Investment Advisors Inc. and Pivotal Asset Management. This was the company’s second round of funding. Its first round, which totaled $18 million in April, was led by Woodside, Calif.-based Crosspoint Venture Partners, which has an Irvine office.
The 3-year-old company plans to spend the money on software development and to build its sales, marketing and service operations, according to Yuri Pikover, Access360’s chief executive.
Interestingly, five of the 15 companies that received funding were based in Irvine.
The 15 companies collectively received $171 million, compared with $207 million of venture funding in the third quarter and $265 million in the second.
In the fourth quarter, venture funds also focused more on later-stage funding or the second and the third rounds. Companies that had established product lines and business plans received the dough from idea-starved venture capital firms.
Four companies that received funding were related to the healthcare industry, while five companies were in the consumer, business or information technology services industry. The remaining six companies were either in software, communications or semiconductor businesses. No dot-com or Internet-related companies received funding.
IntraLase Corp., an Irvine-based medical device maker, received $22 million in its later-stage funding. The new funding will be used primarily to ramp up production of IntraLase’s Pulsion FS laser, sales and marketing efforts and clinical field support for refractive surgeons using the company’s technology.
InterWest Partners, a Menlo Park firm, led IntraLase’s new funding with $12 million. Domain Associates LLC invested $6 million; the remainder was provided by other entities, including EDF Ventures and Brentwood Venture Capital, two previous investors. IntraLase’s previous financing round, totaling $7.5 million, was completed in October 1999.
Another Irvine-based company, Alsius Corp., also a medical device maker, received $20 million in third-round financing from Cambridge, Mass.-based MPM Capital LP, which manages more than $800 million in health industry investments. Alsius, which is Latin for “cool,” develops medical devices such as body temperature monitors and other neurological circulatory support systems. n
