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New technology companies in the capital region raised $40.6 = million in=20 the quarter that ended in September, less than half the money = raised in=20 last year's third quarter.

Three companies announced deals during the quarter:

BelAir Networks, with $23.6-million; Versatel Networks, a = Gatineau=20 maker of Internet phone equipment, with $10 million; and Elliptic=20 Semiconductor, with $2 million.

The Ottawa Centre for Research and Innovation (OCRI) also said=20 yesterday there were unannounced deals for about $4 million.

In last year's third quarter, seven companies raised $90 = million, with=20 Tropic Networks scoring a $44-million round in what was the = biggest single=20 funding in a generally disappointing year.

The latest quarterly results surpass the $39 million raised in = the=20 first quarter but trail far behind the spectacular $209 million = raised in=20 the three months ending in June, when Tropic, Zelos and Meriton = raised $41=20 million to $67 million each.

Financing continues to be a challenge for the many tiny = startups=20 searching for several hundred thousand dollars to get started and = more=20 established new companies seeking several million to carry them to = the=20 next stage.

More deals are expected in the final quarter of the year, = traditionally=20 a busy one.

But the scores of startups in Ottawa-Gatineau need more than = the 21=20 deals announced last year and the 18 so far this year.

"It is not surprising that investment activity in Ottawa slowed = this=20 summer, as we saw the consequences of such a significant amount = being=20 invested so early in the year," OCRI president Jeffrey Dale = said.

"Year-to-date results have already exceeded last year's total = by 17 per=20 cent, which gives a pretty clear indication that investor = confidence in=20 Ottawa remains strong."

Stephen Daze, executive director of OCRI's Entrepreneurship = Centre,=20 added: "Of our disclosed deals, we have seen a 64-per-cent = increase in the=20 average deal size versus 2004."

While Ottawa investments experienced a slowdown in the latest = quarter,=20 funding picked up in the U.S.

Venture capital investment in American startups rose nine per = cent to=20 $5.49 billion U.S. in the third quarter, according to a VentureOne = study.

But for the first nine months of 2005, investment of $16.19 = billion=20 U.S. is one per cent lower than a year=20 earlier.