Venture capital investment in US companies plunged 66 per cent in the second quarter to just $8 billion from $24 billion at the same time last year, raising fears that technological innovation could be sharply curtailed.

The amount invested fell 21 per cent quarter on quarter, the sixth quarterly decline and was the lowest since the first three months of 1999, according to a quarterly PricewaterhouseCoopers MoneyTree survey in partnership with VentureOne, a Reuters subsidiary.

The figures, published yesterday, will create concern that the technological innovation that has provided much of the productivity improvement in the US during the past decade could be stifled by lack of capital. These productivity gains have been critical in reducing inflationary pressures and keeping interest rates low.

Mr Tracy Lefteroff, global managing partner of the venture capital practice at PwC, warned that venture capital investment had not yet hit bottom.

Although venture capital firms have raised huge funds in the past two years, they have become reluctant to invest in new companies. The problem is that the initial public offering market - the traditional route of generating a return on their investment - is moribund. Just 13 US venture-backed companies have gone public so far this year. Trade sales are also rare.

Mr Lefteroff acknowledged that the amount invested this year would be down significantly.

So far this year $18.6 billion had been invested. He expected a total for the year of about $30 billion.

However, Mr David Witherow, president and chief executive of VentureOne, a market research company, said the $18.6 billion investment in the first half of the year was still above the $17.5 billion during the same period in 1998.