Venture capital investments in Internet companies surged 54 percent in the first quarter compared with last year, indicating continuing interest by sophisticated investors in online companies.
The money poured into would-be Yahoos totaled US$460 million in the first quarter of 1998, compared with $298 million during the same period last year, according to a new "Money Tree" survey by PricewaterhouseCoopers. The survey, which tracks investments in start-ups, is an indicator of the pace at which the online industry is evolving.
Although the first-quarter's amount was below the all-time high of $567 million reached during last year's second quarter, it was an indication of the strong interest in a variety of businesses that have grown out of the popularity of the World Wide Web.
In the latest quarter, for example, the survey found that venture capital firms completed 101 Internet deals, compared with just four during the first quarter of 1995.
"We're still extremely early on in the whole development of the Internet," said Michael Moritz, a partner at the Menlo Park, California, venture capital firm Sequoia Capital. Sequoia was one of the original investors in Yahoo.
"I don't think we have yet seen even 10 percent of all the interesting new ideas related to the emergence of the Internet. We are not even at the end of Chapter One," Moritz said.
The online industry has become the biggest recipient of money from venture capitalists, who provide funding to young companies in exchange for a stake in the business.
While some of the money is being put toward companies modeled after existing businesses like online bookseller Amazon.com, venture capitalists say they are also eyeing new business models that have the potential to dramatically alter the Internet from its current form.
