Boxborough's Crossbeam Systems is big VC winner
Almost half of the venture capital that flowed into Massachusetts software companies during the second quarter of the year found its way to the central region, but money targeted for biotech and other industries mostly went east.
The quarterly MoneyTree report, sponsored by Thomson Financial, PricewaterhouseCoopers and the National Venture Capital Association, puts venture investment in the state during the quarter at $785 million, down from $897 million in Q1. At the same time, the total number of deals rose from 89 to 123.
The biggest winner in the region for the quarter was Boxborough network security company Crossbeam Systems Inc, which received $21 million from seven venture firms. CFO Tom Sheehan said the 7-year-old company will use the funding to develop the next generations of its two product lines and expand global sales, marketing and distribution.
In the state's largest startup investment of the quarter, Dallas-based hospital giant Tenet Healthcare Inc. and Fair Isaac Corp. credit reporting service of Minneapolis invested a total of $20 million to help get Harvard company Healthcare Analytics Inc. off the ground. The company will develop software to track the risk that patients will fail to pay their bills.
Seed money
Other venture deals worth more than $10 million apiece went to Virtusa Corp., a Westborough software company that supports e-business and Framingham cell-phone application creator uLocate Communications Inc.
Aside from the big Healthcare Analytics deal, the vast majority of Central Massachusetts companies getting venture funding were already well established, with their products already on the market. In contrast, the report listed more than half of the 23 biotech investees in Greater Boston in the early or startup stage, meaning they are either still developing their product or just starting to produce it.
Jerry Schaufeld, a professor at Worcester Polytechnic Institute's Department of Management said that for the past few years venture firms have been more focused than they once were on safer, later stage investments.
"My own suspicion is that it's just an adverse reaction to the dot-com thing," he said.
Sheehan said the technology bubble burst made it difficult to find financing in Crossbeam's early years, but he said things are getting better.
"Clearly, in the last couple years that trend has reversed in a big way," he said.
Particularly in the last year, Sheehan said, a healthier IPO market has encouraged venture firms to support later-stage companies like his.
Schaufeld said he is happy to see any kind of investment in the area, but he thinks earlier-stage companies like biotech startups need help from other funding sources, like local angel investor groups.
"If we start developing our own intrinsic sources of capital, that's going to, I think, bring focus on what we're trying to accomplish," he said.
WBJ Web Partners
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