Geek Mystique

Show Me the Money

After dropping to a low of $1.3 billion in 1991, the amount of venture capital invested in high-tech firms rose to about $5 billion in 1996, according to analysts at Venture Economics Information Services (VEIS, Newark, NJ). Software start-ups involved in the Internet, networking, and communications attracted the most attention (and money) from venture capital firms, a trend experts anticipate will continue throughout 1997. "The amo unt of venture capital available for software companies is definitely increasing," says Bob Barrett, managing partner at Battery Ventures (Wellesley, MA), a firm that focuses on software, communications, and the Net.

Although there are high risks and uncertainties in the fast-changing world of the Web, VC firms still hunt eagerly for the next cyberspace super start-up. And the increase in venture investments will likely mean more initial public offerings in the next few years, says Arjun Rishi, CEO of Export Software International ( http://www.esi2000.com ). ESI recently received $4 million from Battery to finance its line of software that helps companies doing business in international markets automate their export processes.

Due to keen competition, typically larger start-up costs, and thinner margins, hardware fledglings have for the most part fallen out of favor since the mid-1980s, says Jesse Reyes, director of VEIS, the research and investor services arm of Venture Economics. That's not to say that getting capital for a software start-up is a piece of cake: Battery reckons it invests in only one in 100 companies it interviews. But for start-ups seeking venture, software for cyberspace is generally where it's at.