Tuesday, April 19, 2011

22 New England Companies raise $210M in one week

22 New England companies reported private investments worth $209.5 million last week. Five of the regulatory documents filed with the SEC showed nine-figure numbers for the companies, mostly venture-backed technology and life sciences firms in Massachusetts.

On Friday, April 15, Waltham security software firm Verdasys Inc. reported $28.9 million in an SEC filing. The filing followed an announcement of $15 million in new financing. According to CEO Jim Ricotta, Verdasys has raised about $45 million to date from investors including Fairhaven Capital of Cambridge, Boston investment managers Loring Wolcott & Coolidge, and private-equity and hedge fund investors Special Situations.

On Wednesday, April 13, Cambridge, Mass. cancer drug developer Merrimack Pharmaceuticals Inc. reported raising $77 million in new funding. In a press release the following day, Merrimack said the new funds will be used to advance treatments currently in or near entering clinical trials. Investors include Credit Suisse First Boston Next Fund Inc., Crocker Ventures, Jennison Associates LLC, TPG-Axon Capital and WT Investment Advisors Fund LP.

Taris Biomedical Inc. raised $18.4 million in new funds, according to a Wednesday filing. The company issued a news release announcing the funds on the same day. The funds will be used to advance Taris’ lead combination drug-device product, Lidocaine Releasing Intravesical System, in later-stage clinical trials. Investors include Third Rock Ventures, Flybridge Capital Partners and Polaris Venture Partners.

Read more: 22 New England Companies raise $210M | Boston Business Journal

Friday, April 15, 2011


Clean Technology Investments Top $1.0 Billion, While Later Stage Investment Dollars Surge 54% from Fourth Quarter 2010

Venture capitalists invested $5.9 billion in 736 deals in the first quarter of 2011, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. Quarterly investment activity increased 5 percent in terms of dollars but fell 11 percent in number of deals compared to the fourth quarter of 2010 when $5.6 billion was invested in 827 deals.

The quarterly deal count represents the lowest number of deals in a single quarter since the third quarter of 2009. However, the first quarter of 2011 marks the first time in four years that the amount invested in the first quarter has shown an increase over the fourth quarter investment amount.

The Life Sciences sector (biotechnology and medical device industries combined) saw an increase in venture capital (VC) dollars invested during the first quarter, rising 16 percent but falling 9 percent in deal volume from the prior quarter to $1.4 billion going into 164 deals. Driven by several large rounds including the largest deal of the quarter, investments in the Clean Technology sector jumped 26 percent in terms of dollars and 11 percent in the number of deals from the fourth quarter of 2010.

"The first quarter investment total is setting us on a path for a solid level of investing in 2011. While we did see a drop in deal volume, the dollars invested remains strong," noted Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC US. "Accordingly, we're seeing an uptick in average deal size, which hit $8.0 million in Q1for the first time since the first quarter of 2007. And, in the first quarter, 14 companies received funding rounds of $50 million or more, with four of those deals worth more than $100 million. We haven't seen this many deals worth $50 million or more in a single quarter since the third quarter of 2001. This is a clear indicator that VCs are seeing innovative companies walk through their doors and that the entrepreneurial spirit of America is alive and well and thriving."

"Despite recent hype about both funding gaps and bubbles within the venture capital industry, the first quarter demonstrates an investment pace that is reasonable, rational and relevant to the long term nature of our business," said Mark Heesen, president of the NVCA. "What we are not seeing this quarter is just as critical as what we are seeing. We are not seeing venture capital dollars flooding any particular sectors, including the Internet or clean technology. And we are not seeing a mass exodus from sectors, such as life sciences, where significant challenges lie. What we are seeing is a commitment to funding companies through the various stages of their lifecycles, even in the later stages when capital needs intensify substantially. What this deliberate and prudent pace of investment lacks in hype, it makes up for in sustainability, and we are very encouraged for the coming year."

Industry Analysis

The Software industry received the highest level of funding for all industries with $1.1 billion invested during the first quarter of 2011. This level of investment represents a 9 percent decrease in dollars compared to the $1.2 billion invested in the fourth quarter. The Software industry also had the most deals completed in Q1 with 187 rounds, although this represented a drop of 21 percent from the 237 rounds completed in the fourth quarter.

In terms of dollars invested, the Biotechnology sector was in third place, rising 6 percent from the prior quarter to $784 million in the first quarter of 2011. The number of deals dropped in the first quarter, falling 17 percent to 85 from 103 in the fourth quarter of 2010. This marks the fewest number of deals in a single quarter for the Biotechnology sector since the second quarter of 2003. Medical Devices and Equipment rebounded in Q1 with a 34 percent increase in dollars while the number of deals remained flat. This sector ranked fourth overall in the first quarter in terms of dollars invested with $602 million going into 79 deals.

The Clean Technology sector, which crosses traditional MoneyTree industries and comprises alternative energy, pollution and recycling, power supplies and conservation, saw a 26 percent increase in dollars over the fourth quarter to $1.0 billion. The number of deals completed in the first quarter increased 11 percent to 69 deals compared with 62 deals in the fourth quarter. The increase in Clean Technology investments was driven by several large rounds, including five of the top 10 deals. The quarter marks the fourth time in history that Clean Technology investing exceeded one billion dollars.

Internet-specific companies also received more than one billion dollars with $1.2 billion going into 171 deals in the first quarter, a 19 percent decrease in dollars and an 18 percent decrease in deals from the fourth quarter of 2010 when $1.5 billion went into 208 deals. Internet-Specific’ is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category. Seven of the 17 MoneyTree sectors experienced double-digit increases in dollars in the first quarter, including Semiconductors (63 percent increase), Industrial/Energy (10 percent), and Financial Services (83 percent).

Stage of Development

Seed and Early stage investments increased in the first quarter, rising 11 percent to $1.9 billion. The number of Seed and Early stage deals dropped 14 percent from the prior quarter to 329 deals in the first quarter. Seed/Early stage deals accounted for 45 percent of total deal volume in the first quarter, compared to the fourth quarter when it accounted for 46 percent of all deals. The average Seed deal in the first quarter was $2.2 million, down from $2.8 million in the fourth quarter and is the smallest average deal size for Seed stage investments since the fourth quarter of 2005. The average Early stage deal was $6.4 million in Q1, up from $4.8 million in the prior quarter.

Expansion stage dollars decreased 26 percent in the first quarter, with $1.9 billion going into 211 deals. Overall, Expansion stage deals accounted for 29 percent of venture deals in the first quarter, down from 33 percent in the fourth quarter of 2010. The average Expansion stage deal was $8.9 million, down from $9.4 million in the fourth quarter of 2010. Investments in Later stage deals jumped 54 percent in dollars and 11 percent in deals to $2.1 billion going into 196 rounds. Later stage deals accounted for 27 percent of total deal volume in Q1, compared to 21 percent in Q4 2010 when $1.4 billion went into 176 deals. The average Later stage deal in the first quarter was $10.9 million, which increased significantly from $7.8 million in the prior quarter and represents the largest average deal size for Later stage companies since the second quarter of 2004.

First-Time Financings

First-time financing (companies receiving venture capital for the first time) dollars increased 12 percent but number of deals declined by 9 percent with $987 million going into 221 deals. Firsttime financings accounted for 17 percent of all dollars and 30 percent of all deals in the first quarter, compared to 16 percent of all dollars and 29 percent of all deals in the fourth quarter of 2010.

Companies in the Software, Media & Entertainment, and IT Services industries received the highest level of first-time dollars. The average first-time deal in the first quarter was $4.5 million, up from $3.6 million in the prior quarter. Seed/Early stage companies received the bulk of first-time investments, garnering 61 percent of the dollars and 75 percent of the deals, but fell short of fourth quarter percentages when they accounted for 65 percent of the dollars and 77 percent of the deals.

National results

Regional results

Top 10 Deals for Q1 2011

Tuesday, April 12, 2011

Angel Investor Market Rebounds in 2010,

The 2010 angel investor market saw a robust increase in investment dollars following a considerable contraction in investment dollars in 2008 and 2009, according to the 2010 Angel Market Analysis released by the Center for Venture Research at the University of New Hampshire.

Total investments in 2010 were $20.1 billion, an increase of 14 percent over 2009 when investments totaled $17.6 billion. A total of 61,900 entrepreneurial ventures received angel funding in 2010, an increase of 8.2 percent over 2009 investments, and the number of active investors in 2010 reached 265,400 individuals, a small growth of 2.3 percent from 2009.

“The significant increase in total dollars, coupled with the rise in the number of investments, resulted in a larger deal size – 5.4 percent larger – for 2010 compared with 2009. These data indicate that angels have significantly increased their investment activity and are committing more dollars resulting from higher valuations. It appears that a cautious optimism to investing is taking hold. Noteworthy changes did occur in the critical seed and start-up stage investment landscape,” according to Jeffrey Sohl, director of the UNH Center for Venture Research at the Whittemore School of Business and Economics.

Healthcare services/medical devices and equipment accounted for the largest share of investments, with 30 percent of total angel investments in 2010, followed by software (16 percent), biotech (15 percent), industrial/energy (8 percent), retail (5 percent) and IT services (5 percent).

“Industrial/energy investing has remained a significant sector for angels, reflecting a continued appetite for clean tech,” Sohl said.

Mergers and acquisitions represented 66 percent of the angel exits, and bankruptcies accounted for 27 percent of the exits in 2010. About half of the angel exits were at a profit and annual returns for angel’s exits (mergers and acquisitions and IPOs) were between 24 percent and 36 percent; however, these returns were quite variable.

Angels again reduced their investments of seed and start-up capital, with 31 percent of 2010 angel investments in the seed and start-up stage, a decrease of 4 percent from 2009. Angels also exhibited an increased interest in post-seed/start-up investing with 67 percent of investments in the early and expansion stage, an increase from 2009. New, first-sequence, investments represented 41 percent of 2010 angel activity, also a decline from the last year of 6 percent.

“This decrease in seed/start-up stage and first sequence investing is of concern. However, as existing investments move to an exit and thus reduce the need for follow-on investments, it is anticipated that angel capital will become available for new seed stage investments,” Sohl said.

Angel investments continue to be a significant contributor to job growth with the creation of 370,000 new jobs in the United States in 2010, or 6 jobs per angel investment.

Monday, April 11, 2011



Strongest Annual Start for Fundraising Dollars Since 2001

Thirty-six US venture capital funds raised more than $7 billion in the first quarter of 2011, according to Thomson Reuters and the National Venture Capital Association (NVCA). This level marks a 76 percent increase, by dollar commitments, compared to the first quarter of 2011, which saw 44 funds raise $4.0 billion during the period. The first quarter marks the strongest quarter for US venture capital fundraising since the third quarter of 2008 and the best annual start for fundraising in the US since 2001.

“This year will be a defining one as many venture capital firms will be fundraising, some of whom have been waiting for the investor climate to improve before going out,” said Mark Heesen, president of the NVCA. “While it is encouraging to see the increase in dollars this quarter, much of that was driven by several larger, established funds. We would like to see a similar increase in the number of firms successfully closing funds as the year progresses.”

There were 25 follow-on funds and 11 new funds raised in the first quarter of 2011, a ratio of 2.3-to-1 of follow-on to new funds. The largest new fund reporting commitments during the first quarter of 2011 was Tempe, Arizona-based True North Venture Partners, L.P., which raised $192 million in its inaugural fund. A “new” fund is defined as the first fund at a newly established firm, although the general partner of that firm may have previous experience investing in venture capital.

The first quarter of 2011 saw three multi-billion dollar fundraising commitments, led by Bessemer Venture Partners VIII which raised $1.6 billion during the quarter. Sequoia Capital 2010, L.P. raised $1.3 billion and J.P. Morgan Digital Growth Fund, L.P. raised $1.2 billion. The $1.6 billion commitment for Bessemer Venture Partners VIII marks the largest US venture capital fund commitment since New Enterprise Associates 13, L.P. raised $2.2 billion during the second quarter of 2009.

Friday, April 8, 2011




Venture capital (VC) market activity in Canada edged upwards in 2010, with deals and dollars invested rising compared to 2009. However, continued financing of innovative companies has become increasingly threatened by the on-going decline in VC fund-raising, according to statistics released by CVCA- Canada’s Venture Capital & Private Equity Association and research partner Thomson Reuters.

The data reveal that Canadian VC deal-making increased moderately in 2010, with $1.1 billion invested in total, up 10% from the year before. The number of companies financed, totaling 354 last year, also grew a moderate 5% over this period. The year-over-year increase in disbursement levels was the first since 2007. However, VC activity has yet to approach the $1.4 billion invested in 2008, the first year of the most recent market downturn. What’s more, VC invested in Canada as a percentage of Gross Domestic Product (GDP) continued in 2010 to lag – by more than half – VC invested in the United States as a percentage of GDP.

Growth in Canadian market activity last year was located chiefly in Ontario, British Columbia and Alberta. In particular, Ontario bounced back from a disappointing 2009, with $424 million invested in 2010, up 43%. Québec-based VC activity, which saw growth the year before, instead fell 9% in 2010.

While most dollars continued to flow to IT sectors, which accounted for 42% of the total invested last year, it was deal activity in clean technology and life sciences that spurred overall market growth. Life sciences companies captured 38% more VC than in 2009, and clean-tech companies racked up their largest share on record: 17% of all disbursements.

“While high-growth, entrepreneurial firms in Canada raised a modestly greater amount of risk capital in 2010 than in 2009, demand continues to outstrip supply”, said Gregory Smith, President of the CVCA and Managing Partner, Brookfield Financial. “We can only truly move forward when innovative companies are being financed at the same levels as global competitors” added Mr. Smith, who noted that VC-backed firms in Canada attracted only 39% of the dollars going to firms in the United States in 2010.

“Closing this gap,” said Mr. Smith, “is critical to ensuring that the future growth prospects of young, dynamic Canadian firms are not compromised.” The data show that both domestic and foreign VC funds were more active in Canada in 2010. Canadian funds invested $811 million, up 11% from 2009, while foreign investors brought $331 million to deals, up 6%. However, VC deal sizes averaged only $3.2 million last year, which is almost unchanged from 2009. Like deal-making, exits from VC fund portfolio investments underwent a rebound in 2010. Acquisitions of Canadian-based companies and other exits totaled 31 last year, up 24% from the year before. However, there was only one initial public offering of a VC-backed company in 2010, which is unchanged from both 2009 and 2008. Canadian VC fundraising was especially weak last year. New commitments to VC funds totaled $819 million, down 24% from 2009, and the lowest per-annum level reached in the Canadian market in 16 years. A key factor in the year-over-year drop was a relative shortage of major new VC partnership closings.

“Fundraising continues to be the major challenge facing the venture capital industry,” said Mr. Smith, “ Without a fully-funded domestic industry, the future prospects of thousands of innovative firms that depend on a steady, reliable flow of venture capital investment to grow and prosper will be compromised”, added Mr. Smith. “Unless the current situation is reversed it will become increasingly difficult for high-growth firms to secure the capital they require to grow, and Canada will lose out on development of the innovative, highly-productive economy that is the basic precondition for sustainable job creation.”

Saturday, April 2, 2011

2011 Starts With Fewer M&As, Small IPOs for U.S. Venture-Backed Companies


Dow Jones VentureSource: M&A Activity Dropped As Median Paid Spiked;
IPO Activity Rose But Exits Were Small

The momentum that venture-backed exits gained throughout 2010 did not continue into the new year. In the first quarter of 2011, 104 U.S.-based venture-backed companies achieved liquidity, netting $9.8 billion, according to industry tracker Dow Jones VentureSource. That represents a 21% decrease in exits and a 17% increase in capital raised from the first quarter of 2010 when 131 exits raised $8.4 billion.

"It's eye-opening for venture-backed M&A activity to be closer to levels seen in the first quarter of 2009, shortly after the collapse of the global financial markets, than in 2010, a year associated with recovery,” said Jessica Canning, director of global research for Dow Jones VentureSource. “Corporations have cash on hand and are willing to invest, but the deals aren’t happening. Acquirers may feel that rising valuations have companies on the wrong side of the fine line between good deal and risky investment.”

M&A Activity Dropped As Median Paid Spiked

In the first quarter, corporate acquirers bought 91 companies for $8.9 billion, a 22% drop in M&A activity from the same period last year when 116 acquisitions netted $7.4 billion. M&A activity was slightly higher than the first quarter of 2009 when 83 acquisitions raised $3.3 billion.

Buyouts of venture-backed companies by private equity firms were also down from the same period last year. Private equity firms spent $128 million to buy two venture-backed companies in the most recent quarter, down significantly from the same period last year when private equity firms bought seven companies for $260 million.

The $55 million median amount paid for a venture-backed company in the most recent quarter was more than double the $21 million median in the same period last year. To achieve an M&A or buyout, venture-backed companies raised a median of $13 million in venture financing, 38% less than the same period last year, and took a median of 4.6 years to build their company, less time than the 5.1-year median in the first quarter of last year.

The largest M&A deal in the first quarter belonged to Mountain View, Calif.-based Ardian, a developer of medical devices to treat hypertension, which was acquired by Medtronic for $800 million.

IPO Activity Rose But Exits Were Small

Eleven venture-backed companies went public in the first quarter, raising $768 million, an increase in activity from the eight IPOs that raised $711 million during the same period last year. Healthcare companies have been driving IPO activity the last six months accounting for 45% of IPOs in the most recent quarter and 57% of IPOs in the fourth quarter of 2010.

"U.S. venture-backed companies are still struggling to go public and many of those that do hold IPOs are pricing lower than expected,” said Scott Austin, editor of Dow Jones VentureWire. “But there are signs the second quarter could pick up — the IPO pipeline remains strong and some companies may be waiting for their 2010 financial results to be audited before they try to price.”

Currently, 45 U.S. venture-backed companies are in IPO registration.

The largest IPO for a U.S.-based company was the $107 million offering by Englewood, Colo.-based Gevo, a provider of biobased alternatives to petroleum-based products.

The median amount of venture capital raised prior to an IPO dropped 44% to $87 million in the first quarter of 2011. The median amount of time it took a company to reach liquidity fell to 6.2 years from 9.2 years in same period last year.

Friday, April 1, 2011


Venture-backed company exit activity showed marked improvements over the first quarter of last year, driven by continued strength in M&A and strong aftermarket IPO performance. Fourteen venture-backed IPOs valued at $1.4 billion came to market in the first quarter of 2011, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). This quarter marked the strongest opening three-month period for venture-backed IPOs since 2007. For the first quarter, 109 venture-backed M&A deals were reported, 45 which had an aggregate deal value of $5.9 billion.

Analysis of Transaction Values versus Amount Invested
Relationship between transaction value and investment Q4 10 Q1 11
Deals where transaction value is less than total venture investment 6 6
Deals where transaction value is 1-4x total venture investment 15 17
Deals where transaction value is 4x-10x total venture investment 11 13
Deals where transaction value is greater than 10x venture investment 6 7
Total Disclosed Deals 38 43
Source: Thomson Reuters & National Venture Capital Association
** Disclosed deals that do not have a disclosed total investment amount are not included.

"The venture capital exit market today is exhibiting a welcome stability in terms of both IPOs and acquisitions,” said Mark Heesen, president of the NVCA. “For more than a year, we have seen a high volume of strategic sales that are bringing in solid returns for the venture industry, coupled with an IPO market that is growing and improving steadily in terms of volume and predictability. This stability is an absolute pre-requisite for the growth we need, particularly in the capital markets where the volatility of the recession years contributed to the many challenges of companies going public. A successful 2011 will be contingent upon maintaining the momentum in the acquisitions market while moving the current IPO pipeline through at a faster clip. Ideally we would like to see a 20 to 30 percent increase of US venture-backed companies going public this year. Market signs currently suggest that this is a reasonable goal."

IPO Activity Overview

There were 14 venture-backed IPOs valued at $1.4 billion in the first quarter of 2011, a 47% increase in terms of dollars raised and a 56% increase by number of deals, compared to the first quarter of 2010. This quarter marks the strongest opening three-month period for venture-backed IPOs since 2007. Ten of this quarter’s offerings were from companies based in the United States, with one based in the Netherlands and three based in China.

Seven of the 14 IPO exits for the quarter came from the Information Technology sector accounting for a total of $959.6 million. Netherlands-based InterXion NV (INXN), a provider of carrier-neutral data centers and managed services, was the largest offering this quarter, raising $264.9 million on the NYSE.

Beijing-based Qihoo 360 Technology Co (QIHU), a provider of internet and mobile security products raised $175.6 million on the NYSE on March 30th, and was the second largest IPO in the Information Technology sector.

Gevo Inc (GEVO), an Englewood, Colorado-based biotechnology company, raised $107.3 million on NASDAQ in February, ranking as the biggest venture-backed IPO in the Life Sciences sector during the first quarter.

For the first quarter of 2011, five companies listed on the New York Stock Exchange (NYSE) and nine listed on the NASDAQ stock exchange.

Of the 14 IPOs in the first quarter, 11 are trading at or above their offering prices as of March 31, 2011. Forty-nine U.S. venture-backed companies are currently filed for an initial public offering with the SEC.

Mergers and Acquisitions Overview

As of March 31, 2011, 109 venture-backed M&A deals were reported for the first quarter, 45 which had an aggregate deal value of $5.9 billion. The average disclosed deal value was $130.9 million, down 11 percent from Q4 2010. By total disclosed deal value, first quarter volume marks a five percent increase from the first quarter of 2010.

The information technology sector led the venture-backed M&A landscape, with 74 deals and a disclosed total dollar value of $3.3 billion. Within this sector, computer software and services and Internet specific companies accounted for the bulk of the targets with 35 and 28 transactions, respectively, across these sector subsets.

In the biggest venture-backed M&A deal of the quarter, Medtronic Inc acquired Ardian, Inc, a Mountain View, California—based developer of surgical devices for $800 million.

Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 47 percent of the total during first quarter 2011. Venture-backed M&A deals returning less than the amount invested accounted for 14 percent of the quarterly total.