Q1 Venture Investment In Local Firms Totals $37M | Only six Central Mass. firms land investment
Photo/Courtesy
Mike Worhach,
president and CEO of Sepaton Inc. in Marlborough.
It was expected that venture funding would take a hit in the first quarter, and it plummeted to its lowest point in more than a decade with only six Central Massachusetts companies receiving any venture funding during that time.
According to Dow Jones VentureSource, first quarter venture investment totaled $3.9 billion nationwide, down 50 percent and at its lowest point in 11 years.
Meanwhile, PriceWaterhouseCoopers and the National Venture Capital Association reported numbers for the quarter that were actually worse: Just $3 billion in VC investment, down 47 percent from the same period the previous year and at its lowest point in 12 years.
Neither Dow Jones nor Price-WaterhouseCoopers was surprised by the dismal numbers. The “economic turmoil” that began in the second half of 2008 has VCs retrenching, licking their wounds and doing what they can for the solid companies that remain in their portfolios.
Staying Private
In a way, those companies may be stranded in their respective VC portfolios. An IPO is pretty much out of the question and the market for acquisitions of VC-funded companies has been weak and is getting weaker, according to PriceWaterhouseCoopers.
However, those that did get funding during the quarter are what the firm called “entrepreneurs with game-changing technologies.”
Only six of them are in Central Massachusetts: Still River Systems Inc. in Littleton, Sepaton Inc. and Egenera in Marlborough, Nimbit in Framingham, Aciex in Westborough and Mintera in Acton. The six firms received $37,274,200 in funding during the quarter.
Later-stage software developer Sepaton received $17 million during the quarter. Early stage Still River Systems, a developer of medical devices, got $13.2 million. Medical device firm Aciex saw $3.76 million in first quarter investment; computer firm Egenera gained $1.9 million; Nimbit, which helps independent music acts promote their music and ship CDs, brought in $1 million; and telecommunications firm Mintera brought in $387,000.
Declines in funding hit every industry, but Sepaton and Still River represent two that received the most funding of any. The software sector got $614 million in 138 rounds, a 42 percent drop in deal value and a 34 percent drop in deal volume.
Mike Worhach, Sepaton’s president and CEO, said that while it certainly is not the best time to be raising money, it’s even worse for companies that are looking for funds purely to remain in business.
“Everybody seems to be looking for a bargain,” Worhach said. “But the best time to raise money is when you really don’t need it. We’re coming off a strong performance in the second half of the year and we’re making money. Bringing in a new outside lead (investor) is reflective of that fact. Some companies wait too long to raise money; that’s not an envious position to be in.”
The $15 million round of funding Sepaton landed in the first quarter was led by Focus Ventures, a new investor in the company. The company’s existing investors, Jerusalem Venture Partners, Menlo Ventures, Valhalla Partners and HarbourVest Partners also participated.
The life sciences, biotechnology and medical device sector got $989 million in 133 rounds, a 40 percent decline in deal value and a 31 percent decline in deal volume.
The clean technology sector took an especially hard beating and saw an 84 percent drop in the dollar value of its deals, which totaled $154 million. It was the lowest level for that sector since 2005. Telecommunications, media and entertainment and networking equipment also saw significant decreases in the dollar value of deals.
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