Report Finds Surge in Venture Capital Investments in Area

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Investors haven't hesitated to sink money into John Prisco's privately held 2nd Century Communications Inc., despite growing skepticism of publicly traded technology companies.

Venture capitalists sank $75 million in Mr. Prisco's Arlington-based telecommunications company, which manages computer networks and markets voice and data services to small- and medium-sized businesses, during the second quarter.

They invested $120 million in Silver Spring-based Global Metro Networks Ltd.

"We have had no trouble attracting investors," said Mr. Prisco, 2nd Century's chief executive.

Venture capital investment surged to more than $19 billion nationally during the second quarter, according to a study to be released today by accounting firm PricewaterhouseCoopers, a record level of investment even while stock market performances by technology companies remain volatile and lead to skepticism among some investors.

Local companies also got a record level of investment. Venture capitalists plowed more than $1 billion into D.C.-area companies for the first time.

"It confirms what a lot of people have been saying about this region for a long time - that it's become a major technology area," said Larry Alleva, managing director of the PricewaterhouseCoopers southeast region technology practice in Tysons Corner.

PricewaterhouseCoopers said the amount of money invested in private companies nationally grew from $17.14 billion during the first quarter to $19.58 billion in the three months from April 1 to June 30. The technology sector fueled the increase with $18.7 billion - more than 95 percent of all investments during the quarter - going to technology and Internet businesses.

Venture capitalists make investments in companies in return for an equity stake in a business.

The pace of investing is on track to double last year's investments. Investments during the first six months of this year reached $36.7 billion, compared with $35.6 billion for all of last year.

Private equity investing is growing despite a volatile stock market.

"We haven't slowed our investment pace because of anything going on in the public market," said John Backus, managing partner of Reston venture capital firm Draper Atlantic and chairman of the board of the Northern Virginia Technology Council.

Venture capitalists invest in young, privately held companies with long-term gains in mind. So short-term volatility in the stock market makes little impression on them, Mr. Alleva said.

"Venture capitalists are in it to get a return on their money over the long term - five years or longer," he said.

Companies in the D.C. metropolitan area - a region including the District, Northern Virginia and Maryland - got a combined $1.14 billion, the first time companies in the area attracted more than $1 billion in funding, according to the PricewaterhouseCoopers report.

It was the fifth-highest amount of money for any region in United States. The Silicon Valley region ranked first, with companies there attracting $6.8 billion.

Investors sank $842.4 million in companies in the D.C. region during the first quarter of 2000.

Investment in tech companies in the D.C. area drove the investment frenzy here, and $1.12 billion - or 98 percent of the $1.14 billion invested - went to tech companies. …