Dealmakers appear to be getting their business done before the week of Thanksgiving—because we’ve seen a decent stream of deal closings involving Boston-area life sciences and tech companies over the past week or so.

—Framingham, MA-based Punchbowl Software, which operates the party planning website MyPunchbowl.com, said it acquired technology assets of a group vacation website called I’m In. Punchbowl founder and CEO Matt Douglas provided details on why the transaction made sense for his startup.

—After months of operating quietly, seed-stage venture fund Founder Collective officially debuted last week. Eric Paley, a managing partner and co-founder of the firm, told us why he and other software entrepreneurs came together to form the new venture outfit, which has offices in Cambridge, MA and New York City. Here’s a hint: They were a bit frustrated with the status quo in the venture industry.

—Fate Therapeutics, the San Diego-based biotech startup focused on developing techniques that make stem cell research practical for the pharmaceutical industry, reeled in $30 million in a Series B round of venture financing. Kirkland, WA-based OVP Venture Partners led the new round of investment in Fate, which was founded by top academics at Harvard University, Stanford University, The Scripps Research Institute, and the University of Washington.

—ImmunoGen (NASDAQ:IMGN), a Waltham, MA-based biotech firm, reported this week that the firm sold a second license to its technology—which is for linking targeted antibodies to cell-killing molecules—to industry giant Amgen (NASDAQ:AMGN) for $1 million upfront, plus potential milestone payments.

—Corindus, a Natick, MA-based startup developing a robotic system for implanting vascular stents, collected $5.3 million of a planned $10 million in venture dollars, according to a filing with the Securities and Exchange Commission.

—Cambridge -based Ligon Discovery found $1 million in a seed round of financing from incTANK Ventures, with plans to validate its small molecule microarray system for drug discovery that was developed at Harvard. The company was founded by folks from Harvard Medical School and the Broad Institute of MIT and Harvard.

—We spotted Angus Davis, a co-founder of Microsoft’s voice-based Internet search subsidiary Tellme Networks, at Polaris Venture Partners’ Dogpatch Labs recently and wondered what he was up to. It looks like he’s been working on a new Providence, RI-based startup called Swipely, which quietly swept up a cool $1 million from First Round Capital.

—Jealous? Highland Capital Partners, the Lexington, MA-based venture powerhouse, closed its eighth fund, worth a whopping …Next Page »

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Highland Capital Partners of Lexington, MA, said today that it has closed its eighth venture fund, the $400 million Highland Capital Partners VIII Limited Partnership. “We are pleased to raise a fund in this challenging environment,” Highland general partner Bob Higgins said in the firm’s announcement. PE Hub’s Dan Primack has a deeper look at the long-delayed closing of this fund, which is just half the size of Highland’s $800 million seventh fund, reflecting the recession-ravaged fortunes of the limited partners who back VC firms. Higgins told Primack that Highland anticipates making fewer and smaller investments from the new fund—but that it doesn’t expect to shrink its partnership (in fact, it’s considering hiring up to three new partners).

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We’ve brought you a lot of third-quarter venture data in the last week or so—and we’re not done yet (hint: I have something special coming up for you baseball fans). But we haven’t gotten around to our usual Top 10 deals list.

So let me remind you, it was a pretty good quarter here in Massachusetts. Overall venture investment into Bay State startups climbed substantially over Q2, capped by a strong September in which VCs invested some $228 million in 25 deals, according to data from ChubbyBrain, a New York-based information services company.

And now let me show you the list of the top 10 venture deals in New England—all of which happen to be from Massachusetts. This comes from a different set of data provided by Dow Jones VentureSource.

Top 10 New England Venture Deals of the Third Quarter

Epizyme (Cambridge) — $32 million
Second round
(Investors: Amgen Ventures, Astellas Venture Capital, Bay City Capital*, Kleiner Perkins Caufield & Byers, MPM Capital)

Avila Therapeutics (Waltham) — $30 million
Second round
(Investors: Abingworth Management Inc., Advent Venture Partners, Atlas Venture, Novartis Venture Fund*, Polaris Venture Partners)

Gloucester Pharmaceuticals (Cambridge) — $29 million
Later stage
(Investors: Apple Tree Partners, Novo*, ProQuest Investments, Prospect Venture Partners, Rho Ventures)

iWalk (Cambridge) — $20 million
First round
(Investors: General Catalyst Partners*)

Aveo Pharmaceuticals (Cambridge) — $20 million
Corporate financing
(Investors: OSI Pharmaceuticals)

PrimeraDx (Mansfield) — $19.8 million
Later stage
(Investors: Abingworth Management Inc., Burrill & Company, CHL Medical Partners*, InterWest Partners, Invus Group, Malaysia Technology Devt Corp, MPM Capital)

Rapid Micro Biosystems (Bedford) — $18.6 million
First round
(Investors: Kleiner Perkins Caufield & Byers, Quaker BioVentures, TVM Capital GmbH, VIMAC Ventures)

MooBella (Taunton) — $18 million
Later stage
(Investors: Inventages Venture Capital*)

Pervasis Therapeutics (Cambridge) — $17 million
Later stage
(Investors: Flagship Ventures, Highland Capital Partners, Polaris Venture Partners)

Advanced Electron Beams (Wilmington) — $14.3 million
Later stage
(Investors: Atlas Venture, Flagship Ventures*, GE Energy Financial Services, General Catalyst Partners, RockPort Capital Partners)

* Lead investor

I have to mention the 11th ranked deal—iMedX, which took in $13 million in first-round funding. The company hails from Shelton, CT, and was the biggest third-quarter deal in New England outside of Massachusetts.

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What would you think if I told you that a 20-year-old with an iPhone could turn hundreds of Boston’s sharpest entrepreneurs, business leaders, and students into human game pieces on a life-sized game board? Last Friday, that is exactly what happened as The Quest for Innovation put the spotlight on Boston’s history of entrepreneurship and innovation with a high-tech twist on the classic scavenger hunt.

The Quest, organized by Michael Gaiss of Highland Capital Partners and Seth Priebatsch of Boston-based startup Scvngr, brought together over 100 teams (and some 350-400 participants) from leading Boston-area startup companies, university entrepreneurship programs, industry organizations, and services firms for a mobile phone-enabled scavenger hunt through downtown Boston. The teams each had two key goals: raise funds for local non-profit organizations and entrepreneurship programs (the amount raised has not yet been announced) and secure the Boston technology scene’s ultimate bragging rights. Pulling the strings was the 20-year-old Priebatsch, “chief ninja” of Scvngr, which provided the technology behind the Quest. While the Quest was created using Scvngr’s Web-based game design platform, Priebatsch was able to kick-off and manage the event on site, right from his own mobile phone.

When I decided to assemble a team from my company, Westford, MA-based startup Virtual Computer, I knew I wouldn’t have any trouble finding volunteers. The Virtual Computer team is an extremely competitive bunch. Our office bulletin board is covered with everything from competitor trash talk to disputed scorecards from “friendly” mini-golf outings, and during our recurring trips to the F1 Boston race track it is not uncommon for at least one employee to put victory over career prospects by introducing a company executive to the track wall. Sure enough, within five minutes of sending out an e-mail about the Quest, I had my roster filled.

The organizers of the Quest were fairly tight lipped about how the event would work, so we arrived on Friday afternoon ready to quickly assess the game and develop a winning strategy on the fly. As the team “pilot,” I would be responsible for submitting our team’s answers to each challenge, so I downloaded the Scvngr iPhone application, hoping it would provide even the slightest advantage over the standard SMS text message method of game play. I used the application to officially register our team and then provided my team members with a special code that would allow them to see the game challenges and clues simultaneously as they were delivered to my phone. This way, we could “divide and conquer” as necessary.

As the game kicked off, the teams dispersed in various directions, with the Scvngr system starting the various teams with different clues to avoid a pileup at any given location. Our team quickly …Next Page »

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New England’s diagnostics developers provided more than their fair share of life sciences news this week.

—Rick Jones, CEO of Cambridge, MA-based Ascent Therapeutics, talked with Ryan about his startup’s progress developing new cancer drugs using so-called pepducin technology. Ascent’s lead candidate is emerging in recent tests as a potential rival to Genzyme’s plerixafor (Mozobil), which is used to aid the process of stem-cell transplantation in patients with certain types of blood cancer.

—3PrimiR, a Yale University spinoff based in Westport, CT, raised $2.1 million of a proposed $4 million round of equity financing from unnamed investors, according to an SEC filing. The startup is developing new cancer diagnostics based on research into mutations in a type of molecule called micro RNA.

—Genetic analysis instrument maker Helicos Biosciences (NASDAQ: HLCS) of Cambridge raised $10 million from new and existing investors, after announcing earlier this month that it was running low on cash and exploring “strategic alternatives.” Atlas Ventures, Flagship Ventures, Highland Capital Partners, Versant Ventures, and CEO Ron Lowy contributed to the financing.

—A private family investment firm poured $30 million into Seaside Therapeutics, a Cambridge-based startup aiming to translate research from the lab of MIT neuroscientist Mark Bear into treatments that address the underlying neurological causes of Fragile X syndrome and autism. Founded in 2005, Seaside has never needed venture capital, according to CEO Randy Carpenter, having raised a total of $66 million from the family, the National Institutes of Health, and disease foundations like Autism Speaks and the Fragile X Research Foundation.

—New Haven, CT-based Optherion collected $5 million of a planned $9.5 million convertible notes and warrants offering, according to an SEC filing. The startup is developing a treatment for age-related macular degeneration as well as other drugs and diagnostics for eye and kidney diseases.

—Mansfield, MA-based PrimeraDx raised $20 million in a Series C financing round led by new investor CHL Medical Partners and joined by existing investors Abingworth, Burrill & Company, InterWest Partners, the Invus Group, Malaysian Technology Development Corporation, and MPM Capital. A spinoff of Providence, RI-based Sention, PrimeraDx is developing technology it says can speed up a host of medical tests.

—Having been turned down by the board of Redwood City, CA-based Facet Biotech (NASDAQ: FACT), Cambridge-based Biogen Idec (NASDAQ: BIIB) went straight to the California firm’s shareholders, commencing a $14.50-per-share tender offer for Facet. The offer, which expires October 19, could be worth $355 million in total.

—Diagnostics behemoth Inverness Medical Innovations (NYSE: IMA) of Waltham, MA, acquired Seattle-based Free & Clear for $100 million in cash, plus up to $30 million in potential follow-on payments, depending on the Seattle firm’s 2010 revenues.

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New England’s tech and life sciences companies have cut far too many deals to mention over the last week and a half, so we’re kicking it top-ten style for this installment of roundup.

#10
GreenBytes of Ashaway, RI, completed an $8 million Series A financing from Waltham, MA-based Battery Ventures. The startup also unveiled a new line of energy-efficient data storage devices.

#9
Boston-based Highland Capital Partners led a $9 million first round for Chicago-based InXpo, a provider of virtual meetings and other events and business environments for the likes of AAA, Cisco, Procter & Gamble, Forbes Media, and Ziff Davis.

#8
The assets of Mansfield, MA-based Innovative Spinal Technologies were sold in a bankruptcy auction for $9.25 million in cash. New Jersey-based Integra Life Sciences Holdings (NASDAQ: IART) was the auction’s winner, taking home IST’s product lines and development assets, which span neurosurgery, orthopedic surgery, and general surgery.

#7
Cambridge, MA-based Pervasis Therapeutics raised $10 million of a proposed $17.4 million round of private equity financing from undisclosed investors. The startup, whose board members include MIT’s Bob Langer, is developing drugs to heal blood vessels.

#6
PlumChoice scored $14.7 million in Series E funding from existing investor Edison Venture Fund and others. The Billerica, MA-based firm provides remote technical support for both home and business users.

#5
Tervela, a network messaging hardware maker with operations in Acton, MA, and New York, NY, got an $18 million message from Goldman Sachs, Sigma Partners, Acartha Group, and North Hill Ventures.

#4
Westford, MA-based Verivue, a producer of multimedia distribution switches for cable and telecom operators, raised $20.1 million in an equity offering. The deal was reportedly led by new investor Sigma Partners.

#3
This one’s a tie. Cambridge, MA-based Seaside Therapeutics, a stealthy biotech startup out to turn MIT research into treatments for Fragile X syndrome and autism, raised $30 million from an anonymous family investment firm. And Portsmouth, NH-based software maker BeyondTrust, a maker of tools for controlling IT access privileges, was acquired by Symark International in a deal reportedly worth about $30 million.

#2
Bedford, MA-based software startup 170 Systems was acquired for $32.9 million in cash and notes by Irvine, CA-based Kofax (LSE: KFX). The startup’s technology helps businesses digitize paper-based work flows.

#1
Advanced battery maker A123Systems of Watertown, MA, set a price range for its planned initial public offering. At the proposed $8.00 to $9.50 per share price, the 25 million shares A123 hopes to sell would bring the company between $200 million and $237.5 million in new working capital.

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[Update: 09/16/09, 11:15 am] Helicos Biosciences has gotten a lifeline, at least temporarily. The Cambridge, MA-based maker of genetic analysis instruments which hired an investment banker two weeks ago to seek “strategic alternatives” as it ran low on cash, has raised $10 million from new and existing investors and CEO Ron Lowy. [The deal includes new and existing investors, not just existing investors.]

Helicos (NASDAQ: HLCS) got the money from investors that include Atlas Ventures, Flagship Ventures, Highland Capital Partners, Versant Ventures, and Lowy. The cash infusion comes about a month after Helicos disclosed in its quarterly report, on August 14, that it was down to its last $5 million of cash. That meant it needed to raise money in the next four months, given the company burned $11.3 million of its cash to operate the first six months of this year.

The company is hopeful that its gene sequencing machines—which compete with those from industry heavyweights like Life Technologies, Illumina, and Roche—will gain acceptance in the market in a hurry after they were first introduced last year. Demand is encouraging so far, Helicos says. The company’s tools are used at the Broad Institute of MIT and Harvard, Mass General Hospital Cancer Center, and Dana-Farber Cancer Institute. Last week, Helicos sold four of its systems to a research institute in Japan.

But Helicos makes it sound like it’s not out of the woods, even after raising $10 million. The company hired Thomas Weisel Partners earlier this month to help consider “strategic alternatives,” like more financing, or partnerships, to make sure the company doesn’t run out of money.

“We believe that raising this level of funds is appropriate given the recent demand for the Helicos Single Molecule Sequencing System while we consider our strategic alternatives,” Lowy said today in a statement.

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Pervasis Therapeutics, a Cambridge, MA-based developer of drugs to heal blood vessels, has raised $10 million of a proposed $17.4 million round of private equity financing, according to an SEC filing. The startup names the prolific MIT inventor Bob Langer among its board members.

The SEC filing does not say who invested in the round, but Pervasis’s previous backers include Massachusetts venture firms Flagship Ventures, Highland Capital Partners, and Polaris Venture Partners, according to the firm’s website. This latest deal appears to be a Series C round of financing, based on the financial news that Pervasis has previously announced.

Luke took a more in-depth look at Pervasis’ technology when talked to company CEO Frederick Chereau, a former Genzyme (NASDAQ:GENZ) executive, last October. The company’s lead drug, Vascugel, is in clinical development to help repair of blood vessels in kidney disease patients who are on dialysis.

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Highland Capital Partners of Boston led a $9 million first round of financing for InXpo, the Chicago-based startup announced. Founded in 2004, InXpo creates virtual events and virtual business environments for corporate clients including  AAA, Cisco, Procter & Gamble, and SAP as well as publishers such as Forbes Media, PennWell, TechTarget, and Ziff Davis. “In two years time, there will not be a single physical meeting or event that does not have a virtual component to it,” predicts the startup’s CEO, Malcolm Lotzof.

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The pace of everything in Massachusetts seems to slow in August, and startup financings were not an exception this year. But despite the tail off from July’s big deal-making surge, investments in Bay State startups looked pretty good last month. All told, VCs pumped $179.2 million into 21 deals, according to data provided to Xconomy by ChubbyBrain, a New York-based information services company developing tools for investors, startups, and aspiring entrepreneurs. And while the August tally was below the $215 million and 25 deals seen in July, it was nicely above June’s total of $139.5 million invested in 15 deals—and has to be seen as more evidence that the economy is on the rebound.

The biggest venture deal of the month was a $29 million Series D round for Gloucester Pharmaceuticals. The money came at a great time for the cancer drug developer and its investors: in early September, just a few weeks after the round closed, Gloucester’s drug for cutaneous T-cell lymphoma, romidepsin, was recommended for approval by the FDA’s cancer drug panel. A bit behind Gloucester in deal size was MIT Media Lab spinout iWalk, which took in $20 million in a Series B round. iWalk is developing an actively powered prosthetic ankle and foot. The stars also aligned for Constellation Pharmaceuticals, which had the month’s third biggest deal, a $17.2 million Series A-II infusion. All three companies are based in Cambridge.

You can find a table of all August Bay State venture deals on the second page of this post. There was only one debt financing deal in the month, a $360,000ish deal for BigBad, a Boston web development company. That compared to four debt financings last month.

Other highlights from the August ChubbyBrain data:

—The 21 venture investments ran the gamut from early- to late-stage deals, but once again the majority involved earlier rounds, with one seed stage deal, six Series A financings, and …Next Page »

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Boston-area technology entrepreneurs may not get much work done on Friday, October 9. If Highland Capital Partners can drum up enough interest, hundreds of high-tech employees will be spending that afternoon combing Boston for digital clues as part of what it is calling “The Quest for Innovation.” It’s a high-tech scavenger hunt intended to raise money for local youth programs and universities, and to highlight Boston’s history as a hotbed of new ideas.

The plan is for at least 50 teams representing local startups, venture firms, service providers, universities, and other organizations to fan out across Boston’s Downtown Crossing and City Hall Plaza neighborhoods, competing to solve challenges linked to landmark locations in the city’s history of innovation. They’ll use their cell phones to download the challenges, send back their answers, and get directions to the next clue location, all powered by a game platform developed by SCVNGR, a Boston-based startup backed by Highland. (We profiled SCVNGR last fall.)

Teams will be encouraged to pledge cash to participate, and service providers such as venture firms, law firms, banks, and executive search firms are contributing sponsorships of $1,000 to $5,000, according to organizer Michael Gaiss, a senior vice president at Highland who runs the firm’s marketing, media relations, and entrepreneurial development programs. The proceeds will go to support youth-focused programs such as Youth Cities and the Boston Digital Bridge Foundation, as well as entrepreneurship programs at local undergraduate schools like Emerson College, Wentworth Institute of Technology, and Olin College of Engineering.

The idea for the innovation quest came out of discusssions with SCVNGR CEO and founder Seth Priebatsch about the best way to launch the Boston version of XPLR, the startup’s free tool for building text-message-driven scavenger hunts, Gaiss says. “We took a step back and said, ‘Why don’t we see if we can turn this launch into an innovation-economy gathering—to get together some of the area’s most innovative companies and use it as an opportunity to celebrate our heritage in Boston of centuries of bringing innovations to market,’” he says. “And if we’re successful, maybe there’s a way to give back to the next generation of entrepreneurs in Boston.”

Though Gaiss says the final details are still being worked out, the event will likely begin at City Hall Plaza around 1:00 p.m. on Friday, October 9, with opening remarks from Boston Mayor Thomas Menino. The scavenger hunt itself will take about two and a half hours and will feature …Next Page »

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Turbine, the Westwood, MA-based maker of online role-playing games profiled here last week, has obtained $6.57 million of a planned $50 million Series D round of financing from its venture funders, according to a document filed today with the Securities and Exchange Commission. The funding was first reported by Dan Primack at PE Hub.

So far, the funding appears to be coming entirely from Turbine’s existing investors. Michael Hirshland of Polaris Venture Partners, Bob Davis of Highland Capital Partners, Carmen Scarpa of Tudor Ventures, Jeffrey Patterson of Columbia Capital, and Hany Nada of Granite Global Ventures are listed in the regulatory filing as board directors involved in the new round.

The company has not issued an official announcement about the funding round. Turbine executives and investors did not immediately respond to my requests for comment. [Update, 4:30 p.m., 8/10/09: I reached a representative for Turbine, who said the company has no comment on the financing.]

The new round would bring Turbine’s total venture funding to $145 million, including a $40 million Series C round that closed in April 2008. The 15-year-old, 300-employee company runs two major subscription-based online role-playing game worlds, The Lord of the Rings Online and Dungeons and Dragons Online, as well as Asheron’s Call, its original title. It’s about to launch an overhauled version of Dungeons & Dragons Online that, for the first time for a major U.S.-based online role-playing game, will be free to play. CEO Jim Crowley told me that the company is also on the verge of announcing its first console-based game and may also be about to acquire a new entertainment property similar to The Lord of the Rings and Dungeons & Dragons.

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Sports fans know how a knee injury ruined the last season for beloved New England Patriots quarterback Tom Brady, and many other athletes before him. Now Connective Orthopaedics , a Waltham, MA, medical devices startup, is quietly researching new products that could potentially improve recoveries for people after they undergo knee surgery.

Connective CEO Dean Banks told me that the vision of the company is to eventually provide products that help torn ACLs (short for anterior cruciate ligaments) in the knee to heal themselves, as opposed to the standard treatment of replacing the damaged ligaments with tissue taken from other parts of a patient’s body or from a donor source. The startup has been attracting attention in the sports world by adding Boston Celtics CEO Wyc Grousbeck to its board of directors in June. (It turns out that Connective’s Banks and the Celtics’ Grousbeck go way back—they used to work together at Highland Capital Partners in Lexington, MA.)

Banks declined to give specifics about his company’s technology, but he showed me a recently published study to give me an idea. The study indicated that pigs that had reconstructed ACLs that were wrapped in a collagen-platelet scaffold healed back to normal better than the pigs that went without the scaffolds to help mend their ACLs after reconstructive surgery. Collagen is the ubiquitous protein that supports organ structure in the body, and platelets are blood cells that contain growth-stimulating proteins. Though Connective isn’t saying whether it’s developing a collagen-platelet product, the firm is clear that it wants to develop products that promote tissue healing. The secrecy is one indication of the fierce competition Connective is facing.

“We are really, really intent on staying in stealth mode because …Next Page »

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“The rest of the economy is now dealing with the uncertainty that we deal with every day in a good economy. We do that by choice, they’re doing it now out of necessity.”

The scene was XSITE, the Xconomy Summit on Innovation, Technology, and Entrepreneurship, held on June 24 at Boston University. The speaker was Noubar Afeyan, managing partner and CEO of Flagship Ventures. The question he was answering dealt generally with how the economy has affected the venture capital business. He continued the statement with the glass-half-full conclusion that because VCs are so used to dealing with uncertainty and risk, “Our world has gotten the least worst.”

It was a beautiful close—to audience laughter and applause—to a keynote panel on Innovating Early Stage Venture. To me, it’s also a nice opening to this week’s column, which is focused on the uptake from the session. The panel didn’t do as good a job as it could have with the core topic—i.e., how is venture capital reinventing its own models in these tough times (more on this below). But panelists did provide some interesting insights on issues ranging from how to cope with the current economic malaise (that’s an upgrade from outright disaster) to their thoughts on Greylock Partners moving its headquarters to Silicon Valley to how and whether to seek federal stimulus money.

Before we dive into the details, though, here is the lineup of who appeared that day (thanks to you all!):

—the aforementioned Noubar Afeyan
—Joel Cutler, co-founder and managing director, General Catalyst Partners
—Bob Higgins, co-founder and general partner, Highland Capital Partners
—Eric Paley, co-founder and general partner, Founder Collective
—Jo Tango, founder and partner, Kepha Partners

Their moderator was Michael Greeley of Flybridge Capital Partners, chairman of the New England Venture Capital Association. He did a great job keeping his squad team of panelists on its toes by asking pointed questions and bringing out the insights below.

‘Cut, Cut, Cut’ is only part of the story for entrepreneurs coping with the current economic climate

Afeyan took issue with the hoopla raised by West Coast VCs (i.e. Sequoia Capital Partners) last fall when they publicly advised startups to cut expenses hard and fast in the face of the recession. Cutting is only part of the challenge, Afeyan warned, saying you can’t cut expenses without a commensurate cut in goals.

Connections are more important than ever in this economy, someone pointed out (sorry, I missed who). That’s presumably because everyone is so busy trying to cope with the downturn that any edge a good connection can provide—in solving a problem or getting something done faster or more efficiently, etc.—is magnified. I took this to mean: make leveraging connections a bigger part of your mindset, whether that means reevaluating connections you already have, or by looking at the connection potential partners or investors bring to the table.

Is the recovery already here for VCs?

A series of snippets on this topic:

—Higgins: “Things really were, I think, back to normal in the spring of ‘09.”
—Tango: Deal flow is up 25 percent for Kepha. That’s when looking at the last three quarters on an annualized basis, versus annual figures from past years. (”We wanted to see how were doing since the September 08 stock market crash,” he explained to me in a follow-up e-mail.)
—”We’ve been really busy,” Cutler agreed, adding, “There’ll be plenty of money for good firms.” Then he seemed to catch himself just a bit, saying, “There’ll be enough money.”
—Afeyan: “The exit environment seems to be turning.”

On innovating in venture—early stage or otherwise

I think the panel came up short on addressing this issue. Greeley did his part by putting the question to his guests in several different ways, one of which was: “How do you react to the question that we don’t take enough risk?”

That led to a long silence that drew laughter from the crowd. Higgins then pointed out that Highland has done 60 seed deals the last four years, of which just 15 went on to a Series A round. “You’ll never hear of the other 45,” he said, illustrating his point that Highland, at least, takes risk. Higgins said that in his view, “The decline in venture capital is not the headline.” It’s the decline in angel groups, corporate venture arms, and hedge funds.

Afeyan also said his company is very active in early stage investing. Overall, he said, “I don’t sense a dramatic change in the amount of early stage risk capital, certainly not in Boston.”

Paley, though, had a slightly different take, at least on the surface. “There is a lot of room for some smaller funds” under $100 million, he said. He also said there was room to find new models for venture funding, or revisit old models with a new eye.

General Catalyst’s two-for-one sale

Following up on the previous question, Cutler put forth …Next Page »

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Finally, an IPO! That, and the rest of the week’s deals news from New England’s tech and life sciences industries below.

—Lexington, MA-based Highland Capital Partners reportedly pushed the close of its eighth venture fund back from late June until mid-July to give limited partners more time to contribute. PE Hub’s Dan Primack wrote that the firm is still about $100 million short of its $400 million target for the fund.

—Diagnostic test developer IntelligentMDx raised $3 million from a group of unnamed, non-venture investors. The Cambridge, MA-based startup had previously raised about $23.5 million.

—CloudSwitch, a Burlington, MA-based startup out to help make it easier for companies to avail themselves of cloud computing technology, closed an $8 million Series B funding round. Commonwealth Capital Ventures led the deal, which was joined by Matrix Partners and Atlas Venture.

—Software firm LogMeIn pulled off a $107 million IPO, the year’s first for a venture-backed New England firm. Shares of the Woburn, MA-based company (NASDAQ: LOGM), which makes software for remotely accessing computers, were priced at $16 apiece—the high end of the projected price range—and quickly climbed into the $20 range.

—Cambridge, MA-based CombinatoRx (NASDAQ:CRXX) announced plans to merge with a privately held firm in Vancouver called Neuromed Pharmaceuticals. The deal’s unusual structure initially gives each firm’s shareholders 50 percent of the combined company, with the ratio to shift in favor of Neuromed’s shareholders if the company’s anti-pain drug candidate Exalgo is approved by the FDA before October 1, 2010, or in favor of CombinatoRx shareholders if the drug is approved after that date or not at all.

—Weston, MA-based ActiFio, a stealthy IT firm, raised $4 million of a planned $8 million equity financing round. Investors in the deal were not identified, but James Goldstein of North Bridge Venture Partners is named in a federal filing as a member of the startup’s board.

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According to report today by PE Hub’s Dan Primack, Highland Capital Partners of Lexington, MA, has postponed the close of its eighth venture fund until mid-July to allow more time for limited partners to pony up. Primack’s analysis, based on conversations with unnamed limited partners, is that lackluster venture returns (8 percent on Highland’s sixth fund, -16 percent on its seventh) are making it difficult for the firm to entice back existing LPs or bring in new ones, despite a fee reduction; he reports that the firm is still about $100 million short of its $400 million target for the fund, which was originally scheduled to close this week.

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If you want to build a program to nurture early-stage startups in New York City through regular meetings with investors, legal and financial advisors, and experienced CEOs, where do you turn for mentors and sponsors? To Boston, naturally.

Of the 11 founding members of the new First Growth Venture Network, five—Battery Ventures, Charles River Ventures, Flybridge Capital Partners, Highland Capital Partners, and North Bridge Venture Partners—hail from the Bay State.

The network, unveiled today, will admit a handful of New York-based startups each year—the exact number has yet to be determined—and connect them with mentors, and potential investors, through a series of social and team-building events. Each startup will also be matched with a team of industry-veteran advisors that includes at least one venture capitalist, one angel investor or successful senior executive, and one legal/financial advisor, according to the group’s chair, Edward Zimmerman.

The big Boston contingent in First Growth is a reflection of the fact that so many Boston-based venture partners already consider New York an important fishing grounds, says Zimmerman, who created the Tech Group at New York-based law firm Lowenstein Sandler and is an active angel investor. (He’s the founder of both AngelVineVC, a consortium of East Coast venture funds and angel investors, and GrapeArborVC, a New York-based team of 12 angel investors.)

Over the last 18 months, Boston-based venture partners have been “spending more time in New York looking for backable companies,” Zimmerman says. That’s partly because of the digital media explosion—traditionally one of New York’s strengths—and partly because the economic crisis has stimulated young businesspeople who might otherwise have pursued careers on Wall Street to try entrepreneurship instead, he says.

“The golden handcuffs have come off,” says Zimmerman. That’s led more Boston-area VCs to swoop in looking for talented startup executives—so in a sense the new mentoring program is “just a way to help what’s already happening,” he says.

But there are also other interpretations. Jeff Bussgang, a general partner at Boston’s Flybridge Capital Partners who is also a founding member of First Growth, puts it this way: “The deals we see in Boston typically center around MIT or Harvard, which have created this really nice ecosystem and mentorship network, between all the business plan competitions and things like the Deshpande Center. So we’ve seen the formula in Boston work really well, and we want to recreate it in New York.”

Also, there’s simply more capital in Massachusetts, chasing a finite set of backable entrepreneurs. (In fact, venture firms put $10,257 per worker into infotech-related companies in the Bay State in 2007, according to the University of Massachusetts’ Donahue Institute; only California attracted more investment on a per-capita basis, with $11,361 per worker, compared to a national average of $2,780 per worker.) New York is “not as crowded at the early stage,” Bussgang says. “So a lot of people have been taking the Acela back and forth.”

The First Growth network is already accepting applications for the program’s first year, which will begin in September and will consist of two semesters, September to December and January to June. According to Zimmerman, the group will meet four times per semester for roundtables, networking, and cocktails. Participating startups will also be in frequent touch with their advisory teams outside of these formal meetings.

For startups, there’s no cost to apply or participate in the program, and the network’s sponsors won’t require startups to hand over an equity stake in the companies, as is common among venture incubator programs such as Y Combinator in Mountain View, CA, TechStars in Boston and Boulder, CO, and Dreamit Ventures in Philadelphia. “This is not so that [startups] will get funded by someone in the network; it’s not about …Next Page »

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The B word (billion) cropped up in not one but two deals in this week’s New England tech and life sciences news.

—Cambridge, MA-based E Ink agreed to be acquired for $215 million by Taiwan-based display manufacturer Prime View International. The Taiwanese firm was already a partner of E Ink’s on the manufacture of its electronic paper display technology, which is used in Amazon’s Kindle and other e-book devices. Wade had a great interview with E Ink CEO Russ Wilcox after the deal was announced.

—RxVantage of Providence, RI, took in a $500,000 seed investment from Providence venture firm Slater Technology Fund. The startup provides Web-based scheduling software for healthcare companies and doctors’ offices.

—Hopkinton, MA-based EMC (NYSE: EMC) launched a bidding war with Sunnyvale, CA-based rival NetApp (NASDAQ: NTAP) over Data Domain (NASDAQ: DDUP), a Santa Clara, CA-based data deduplication company. NetApp had already offered $25 a share for Data Domain on May 20; EMC came in with a $30 per share offer on June 1—a deal that would value Data Domain at $1.8 billion. NetApp came back two days later with a $1.9 billion offer, which is still on the table.

—Optical-switch maker Polatis of Andover, MA, and Cambridge, England, routed $8 million into its coffers from existing investors 3i Ventures, Alta-Berkeley Ventures, DFJ Esprit, …Next Page »

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Boston-based Hangout Industries, which runs the teen social virtual world Hangout.net, has extended its Series A financing round by $4 million, CEO Pano Anthos confirmed today after documents on the financing surfaced online yesterday. Highland Capital Partners and Polaris Venture Partners put up the funds, which bring the company’s total financing to $10 million, including a $1 million seed round and a $5 million first tranche in the Series A round. Hangout came out of stealth mode last September, and recently hired former Disney exec Mike Goslin and opened a West Coast office as part of an effort to focus the online property on entertainment, social interaction, and virtual goods sales.

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