New England Venture Activity Rebounds Slightly in Q2—Region’s Top 10 Deals List

7/21/09

New England companies raised more venture dollars and completed more VC deals in the second quarter of 2009 than they did in the first three months of this year, according to two reports on venture investment activity released recently. Still, the total number of deals and capital invested in the region during the three months that ended June 30 are way off from a year ago.

Firms in New England invested a total of $640.1 million in 85 deals during the second quarter, down from $1.05 billion that went into 94 deals during the same period last year, according to Dow Jones VentureSource. Perhaps some solace can be derived from the fact that the 85 deals done during the quarter amounted to a 57 percent increase over the 54 VC deals completed during the first quarter of 2009. Total VC dollars invested, however, increased by less than 2 percent, to $640.1 million in the second quarter from $629.2 million in the first three months of 2009. (See our Top 10 Deals list for the quarter on page 2 of this article.)

Regional data from The MoneyTree Report released yesterday by PricewaterhouseCoopers, the National Venture Capital Association, and Thomson Reuters shows a similar trend. The MoneyTree survey counted $466.9 million invested in 76 deals during the second quarter, down from the $825.8 million that went to 128 deals during the same quarter of 2008. (The rival surveys use different methods, sources, and criteria to prepare their respective reports.) MoneyTree showed a 15 percent uptick in venture capital invested from the previous quarter, but only an 8.6 percent increase in the number of deals.

Despite the rise in venture activity compared to the first quarter, the recession still appears to be weighing on VC firms’ willingness or ability to dole out money to tech startups. The Dow Jones figures show that deal amounts in New England are getting smaller even in sectors like healthcare where venture-backed companies are keeping pace with the number of deals they completed last year. And if what venture investors tell us is true, many recent deals involve older companies in need of capital to stay afloat until those companies can go public or find a corporate buyer. That could mean less money for new startups in search of capital to get their operations off the ground.

Here are some of the key figures that Dow Jones reported:

—The median deal amount across all sectors in New England was $4 million in the second quarter of 2009, way down from the median deal size of $7.6 million during the same period last year.

—The number of the region’s healthcare deals—involving biotech, medical devices, healthcare IT, and health services firms—was up slightly in the second quarter compared to the same period last year, from 28 to 29 financings. But total dollars invested fell to $370.3 million in the second quarter from $444.6 million in Q2 of 2008.

—Energy companies in the region raised only $8.2 million in four deals in the second quarter of this year, down from $24.4 million in six deals in the same quarter last year.

—The number of IT deals held relatively steady at 35 in the second quarter, down from 40 deals in the same period of 2008. Still, the total raised declined from $398.4 million to $150.2 million in the same quarter-to-quarter comparison.

See next page for the region’s Top 10 venture financings of the second quarter.

New England’s Top 10 Venture Deals—Q2 2009*

Powerspan (Portsmouth, NH) — $54 million
(Investors: AllianceBernstein, Angeleno Group, Beacon Group, Calvert Social Venture Partners, FirstEnergy Corporation, NGEN Partners, and RockPort Capital Partners)

ConforMIS (Burlington, MA) — $50 million
(Investors: Aeris Capital, SBG Sachsen-Anhalt, and Thorner Ventures)

Aileron Therapeutics (Cambridge, MA) — $40.15 million
(Investors: Apple Tree Partners, Excel Venture Management, Lilly Ventures, Novartis Venture Fund, Roche Venture Fund, and SR One)

Synageva BioPharma (Waltham, MA) — $33 million
(Investors: Baker Brothers Investments, Hunt BioVentures, Tullis Health Investors, and Yasuda Enterprise Development)

Tokai Pharmaceuticals (Cambridge) — $22 million
(Investors: Apple Tree Partners and Novartis Venture Fund)

Interlace Medical (Framingham, MA) — $20.5 million
(Investors: Aperture Venture Partners, Baird Venture Partners, Hambrecht & Quist Capital Management, HLM Venture Partners, New Leaf Venture Partners, and Spray Venture Partners)

Concert Pharmaceuticals (Lexington, MA) — $16.3 million
(Investor: GlaxoSmithKline)

I-Therapeutix (Waltham) — $15 million
(Investors: Polaris Venture Partners, SV Life Sciences, and Versant Ventures)

Demandware (Woburn, MA) — $15 million
(Investors: General Catalyst Partners and North Bridge Venture Partners)

Elixir Pharmaceuticals (Cambridge) — $12 million
(Investors: ARCH Venture Partners, MPM Capital, Omega Fund, Oxford Bioscience Partners, and Physic Ventures)

* source: Dow Jones VentureSource

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