Two quarterly surveys of venture capital financing show investments soaring statewide and nationally in the second quarter of 2003.
According to the PficewaterhouseCoopers/ Thomson Venture Economics/National Venture Capital Association MoneyTree Survey, 11 Connecticut companies received $114 million during the second quarter.
The amount invested and the number of deals made in Connecticut during the quarter rose 153 percent and 22 percent, respectively, compared with the same period last year
“Investments in Connecticut companies improved this quarter. It appears that venture capitalists have become cautiously more interested in putting their uninvested funds to work,” said Owen Davis, co-chair of PricewaterhouseCoopers venture capital/private equity practice in Connecticut and Westchester County, N.Y.
Nationally, venture capital investment rebounded in the quarter, reaching $4 billion, according to the Ernst & Young/VentureOne U.S. Venture Capital Survey.
While the number of transactions increased slightly from 424 in the first quarter to 442, a return to higher median investments in the health care sector pushed the actual dollars invested up by 14 percent.
State out pacing county in Q2
The Ernst &Young survey tracked six deals in Connecticut for the quarter, totaling $91.18 million.
Only about $7.6 million of the total went to local ventures, with the largest amount in Fairfield County going to Active Endpoints of Shelton.
The information technology company received $6.5 million in its first round from a group of investors, including Atlas Venture and North Bridge Venture Partners.
Norwalk-based Micro Warehouse Inc., a retailer of personal computers and software, received $300,000 from Trident Capital in the quarter in its second round.
And, Odyssey Logistics & Technology Corp. of Danbury won $815,000 in its first round from RRE Ventures L.L.C. Odyssey provides outsourced logistics management services.
According to the MoneyTree survey, the New York metropolitan area, which includes Fairfield County, recorded 56 deals worth $380.4 million in the quarter.
The Ernst & Young survey sad 40 New York area deals dosed in the quarter totaling $504 million.
Biotech leads the way
In Connecticut, the biotechnology industry obtained the largest share of venture capital in the quarter, totaling $52.4 million. The industrial/energy industry ranked second with $40.9 million. Telecommunications placed third with $10.4 million. The computer and peripherals industry followed with $6.5 million. Investments in health care services and retailing/distribution industries totaled $3.5 million and $300,000, respectively.
According to the Ernst &Young report, the health care sector pushed up the increase in the overall amount invested nationally, with biopharmaceuticals and medical devices performing particularly well.
“As the baby boom generation ages, the demand for health
care products will only increase, and the cost of those
products is rising,” Roger Savell, metropolitan New York
venture capital advisory group leader at Ernst &Young, said.
“Additionally there are a myriad opportunities surrounding
innovation related to the Human Genome Project. So, despite
the regulatory hurdles, we believe that investing in health care
companies now makes long-term sense, and we’re encouraged
by the variety of the deals we’re seeing.”
VCs still queasy about start-ups
Investments in expansion-stage companies declined slightly to $2.3 billion, or 54 percent of total investments across the United States.
This was partially offset by an increase in investing in laterstage companies to $958 million, or 22 percent of the total investments.
“Although there was a notable increase in early stage investing in the second quarter, VCs continue to seek safer ground by investing in more established companies,” said Jesse Reyes, vice president at Thomson Venture Economics. “It doesn’t necessarily mean that early stage investing will subside, but due diligence on early stage and startup deals is a much more rigorous process than it was two years ago, and it will remain so for the foreseeable future.”
Dramatic turnaround?
Nationally, two straight years of quarter-to-quarter declines in venture capital investing ended in the second quarter. Investments totaled $4.3 billion, up marginally from $4 billion in the first quarter, according to the MoneyTree survey.
A total of 669 entrepreneurial companies received money in the second quarter, compared with 647 companies in the first quarter of this year.
“Is this quarter a harbinger of a dramatic turnaround in venture capital investing? It’s not likely,” said Mark Heesen, president of the National Venture Capital Association. “The venture industry invests based on anticipated future market conditions, so before we declare a trend reversal we must first see a sustained opening of die IPO (initial public offering) market and consecutive quarterly increases in corporate capital expenditures. That being said, the venture capital industry is actually in a good place right now – not withholding money, but not spending it freely, either. A few more quarters at this pace would be healthy.”
Copyright Westfair Communications Aug 11, 2003
