Bad Year, Good Quarter For Venture Capital Q4 Investments Increased Despite a sizable decline, 2001 ends up ranked as third best of all time.(INTERNET & TECHNOLOGY)

Byline: ANTONIO A. PRADO

Though venture capital investing plunged in 2001, the year finished as the third strongest on record. And funding actually rose in the fourth quarter, a new report says.

Start-ups received more than $7.1 billion in funding from October to December, according to the MoneyTree Survey by the National Venture Capital Association, PricewaterhouseCoopers and research firm Venture Economics.

The full-year tally was $36.5 billion, a 63% dive from the record $99.6 billion invested in 2000. But while that's the lowest amount since 1998, it's the third-highest finish since record-keeping began in 1969. "Stories of the demise of the venture capital industry are largely exaggerated," said Joe Aragona, general partner at Austin Ventures in Austin, Texas.

The fourth quarter's modest gain vs. the third quarter's $7 billion was the first rise since the third quarter of 2000.

That uptick's a good sign, given the recession, the dot-com and telecom shakeouts and the tech stock wreck, not to mention Sept. 11, says Tracy Lefteroff, managing partner at PricewaterhouseCoopers' venture capital practice.

"The free fall is over, and we've landed safely on higher ground," Lefteroff said. "We also hear a lot of comments individually from the general partners of the big firms that things are improving. I think we have bottomed out."