New England Venture Investment Falls Sharply in Q1—But Exactly How Far Is the Question

4/21/08Follow @bbuderi

Venture investments in New England firms were down in the first quarter of 2008. Way down. But just how far they tumbled is a matter of debate—as regional numbers from the two leading venture-data sources, just released, differ far more than usual. New England remained in second place nationwide in one study, but fell from second place to fourth, according to the other.

First-quarter 2008 venture investments in New England tumbled some 24 percent to $721 million from $951 million in the fourth quarter of 2007, according to the MoneyTree report released today from the National Venture Capital Association and PricewaterhouseCoopers and based on data from Thomson Reuters. Meanwhile, data from Dow Jones VentureSource, released over the weekend, shows the region in a far greater downturn, losing 36 percent as it slid from $904 million to a mere $577 million. The two groups have different methodologies and definitions of venture investment, but I haven’t seen them differ by this much in the time that Xconomy’s been following the numbers. A VentureSource spokesman said he had no ready explanation beyond their differing methodologies.

VentureSource has New England sliding to fourth place nationwide, behind San Francisco/Silicon Valley, which rose 10 percent to $2.6 billion invested in 213 deals, Southern California ($672 million, 63 deals) and New York Metro ($602 million, 52 deals). Its data showed New England firms receiving $577 million in 72 deals, so by deal number the area was still second. According to the MoneyTree data, the region was still the nation’s second most active by VC dollars invested in area firms, after Silicon Valley. But that report breaks out Los Angeles/Orange County and San Diego separately. If they are combined, Southern California would take second place and New England would be third.

Nationwide, financing numbers were also down, though not as far down as New England. The MoneyTree report showed an 8.5 percent overall decline, from $7.8 billion in the last quarter of 2007 to $7.1 billion. That was the smallest quarterly outlay since Q4 of 2006. VentureSource saw a similar slide of roughly 8 percent from the fourth quarter, to $6.8 billion.

On a national level, healthcare was the sole field to record an overall decline in venture outlays in the first quarter compared to a year earlier, according to VentureSource. This sector, which encompasses biopharmaceuticals and medical devices, dropped 43 percent, from roughly $3 billion to $1.7 billion. Information technology, by contrast, was up more than 20 percent compared to last year’s first quarter, rising from $3.2 billion to $3.9 billion invested in 358 deals. Thirty-four cleantech deals garnered roughly $532 million, flat with a year earlier.

New England data mirrored this trend, at least to some degree. The largest area of invesment by far was was information technology, where $321 million was invested during the quarter, according to VentureSource. This was down sharply from the $514 million a year earlier, but accounted for more than half the region’s investment outlays. Nearly half of this total, $154.5 million, went into 18 software deals. The next biggest area was biopharmaceuticals, which saw $92 million put into 11 deals. This was actually one deal more than the first quarter of 2007, but the total value of the investments was down from the $304 million of a year earlier.

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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