All is quiet on the venture-capital front - and Tristate venture capitalists couldn't be happier.

        In the aftermath of an economic downturn, a high-tech shakeout and last month's terrorism, the flow of money from venture firms has dried up considerably since the anything-goes days of 2000. Compared to a year ago, the number of venture deals and amount of dollars invested in the third quarter of 2001 were both down by two-thirds.

        The result is an investors' market. Venture capitalists in Greater Cincinnati say they can pick and choose the companies in which they take ownership positions. And when they do invest, they're able to dictate better terms for themselves.

        “The value of a private company today compared to a year ago is down 70 percent,” said Jack Wyant, founder and managing director of Blue Chip Venture Co. in Cincinnati. “A company worth $10 million a year ago is worth $3 million today. So if you're an investor, you're buying a much larger portion of a company than you did a year ago.”

        That view is held by other venture capitalists and independent so-called “angel investors.” The need for capital remains high, but with money supply tight, companies in need can't expect big sums for small stakes.

        “If you have lower valuations, you're obviously able to stretch your dollars,” said Kevin Kushman, managing director of Cinergy Ventures, a sister company of Cincinnati Gas & Electric.

        Numbers tell the venture-capital story in 2001. Through Sept. 30, 2,360 companies received $29.2 billion nationwide, Mr. Wyant said, citing market-research data. During the same nine-month stretch of 2000, 5,191 companies received $76.9 billion.

        The July-September quarter signaled an even steeper drop-off in venture-capital movement. Mr. Wyant said 540 companies received $6.7 billion, compared with 1,634 companies and $23.9 billion in the same quarter in 2000. The $6.7 billion represented a 48 percent drop from the second quarter.

        These days, venture capital tends to land in the bank accounts of companies that are surer bets.

        “There are more opportunities for venture firms and angel investors in later-stage companies with established revenue that are not able to get conventional financing,” said George Molinsky, a lawyer and chairman of the Main Street Ventures technology accelerator in Over-the-Rhine. “If you're a pure startup, it's more difficult to raise that kind of money today.”

        That's quite a contrast to 1999 and 2000, when venture capitalists were tripping over each other to buy a piece of the latest dot-com or telecom company for an absurdly high price.

        “At the height,” Mr. Molinsky said, “the word was out on the street that if you had a pretty good idea and had a pretty good plan to pursue that idea, there was an abundance of early-stage money to get you going. Today, there remains a strong entrepreneurial spirit and flow of activity, but it's not the kind of exuberant atmosphere.”

        Tony Shipley is one of those angel investors still looking for early-stage companies to back. The founder of Queen City Angels called his group “very active.” Pulling the trigger is another matter, though, and Mr. Shipley said the number of completed deals is down substantially from a year ago.

        “There is money out there for good projects, but they've got to be packaged properly and have the right ingredients from a business standpoint,” Mr. Shipley said.

        Queen City Angels, he said, seeks out companies that have solid growth prospects and “appropriate” values.

        “If we can help grow our companies to the point where they're attractive to the venture capitalists, hopefully we'll tee it up and make a AAA company ready to move into the major leagues,” Mr. Shipley said.

        Meantime, venture managers are being cautious and selective. Mr. Wyant of Blue Chip Venture said the city's three big venture-capital firms — Blue Chip, River Cities Capital Group and Walnut Group — have a combined $1.15 billion under management, but only $650 million invested.

        To Mr. Wyant, the tailspin in the venture capital market is cause for optimism.

        “In our opinion, we're at the beginning of one of the most attractive investment cycles in the history of the industry,” he said. “This literally may be an inflection point marking the beginning of a dramatic growth period in venture capital and the small private companies we back.”

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