Jul. 29–Venture capital investors are starting to put more money to work, according to data released Monday, but Illinois companies are getting a slim 1 percent of the nation’s total financing.
Nationwide, U.S. venture capital firms invested $4.28 billion during the second quarter in fast-growing private companies, up about 6 percent from $4.04 billion in the first quarter, according to the MoneyTree survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.
Though hardly a turnaround, the uptick is the first quarterly increase after two years of declines, according to MoneyTree data.
A second survey released Monday by Ernst & Young and VentureOne said U.S. investment increased 14 percent to $4 billion, largely because of a surge in biotech and pharmaceutical deals.
Local venture backers confirmed that deal flow is picking up.
“Venture capitalists who were sitting on large funds for the past couple of years are realizing they need to get the money to work,” said Mark Glennon, vice president of Northbrook-based Leo Capital Holdings.
Marc Sokol, a partner specializing in software and information technology at Chicago’s JK&B Capital, cautioned that it’s too early to call a turn in the market because business activity overall remains weak.
“We’re seeing early signs of recovery, but there’s skepticism and no one wants to bet on it,” Sokol said. “Pessimists are never disappointed.”
Still, there were encouraging signs in the national data released Monday.
The number of companies receiving venture capital for the first time increased slightly in the second quarter after hitting an eight-year low in the earlier quarter, according to the MoneyTree survey.
In Illinois, the picture was less bright. Eight companies received a total $28.8 million, according to the MoneyTree survey, or less than 1 percent of the dollars invested nationally.
Ernst & Young and VentureOne reported two Illinois deals totaling $10.9 million.
The differences in the surveys reflect different methodologies and the fact that none of the information is available from public sources.
The MoneyTree survey reports that Illinois averaged about 1 percent of the total U.S. investment for the last six quarters–down from 2 percent in earlier years.
In 1999 and 2000, now bankrupt Divine Inc. boosted the total by pouring tens of millions in local start-ups. There also was a boomlet of new local venture capital firms that subsequently have stopped making new investments.
“There are fewer early stage investors active in Illinois, and the area’s older, bigger and better established firms are casting a wider geographic net,” said Bruce Hanson, director of entrepreneurial services at PricewaterhouseCoopers in Chicago.
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