Venture capital for 'Net start-ups flat in '08: report

Internet-based and software companies held their own in 2008 among businesses receiving venture capital money, bucking the overall trend of fewer available venture dollars.

Companies that depend on the Internet held their own for the year, garnering $4.9 billion vs. $5 billion the previous year, accounting for 17% of overall investment, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association.

Software companies represented the largest single category of investment sectors in both the number of dollars invested and the number of deals (881). But they still took a venture hit in 2008, with investments of $4.9 billion representing a 10% decline from 2007.

Only two tech-sector companies companies made the top 10 list for most money received in 2008. One was Pocket Communications Northeast, a flat-rate cell-phone network provider with service in parts of Massachusetts, Connecticut and Texas that took in $100 million.

Rearden Commerce also took in $100 million for its software-as-a-service business that provides an online personal assistant that can handle business conferencing, shipping, travel, dining and events for its customers by tapping into its network of partner vendors.

In the fourth quarter, i/o Data Centers, a data center collocation provider, landed $56 million to expand its business, ranking it among the top 10 recipients for the quarter.

From a broader perspective, young start-ups and clean technology reaped a bumper crop of venture capital money in 2008, a year that saw overall venture funding drop 8% compared with 2007, according to a quarterly summary of investment activity.

Seed-stage investments reached their highest level since 2000, jumping up 19% over 2007, capturing $1.5 billion.

Seed-stage companies also represented 57% of all companies receiving venture money for the first time.

For the year, clean technology companies -- solar energy and batteries -- pulled down $4.1 billion in 2008, a 57% increase over 2007, and accounting for 15% of all dollars invested by venture firms for the year, the study says.