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Print Edition StoriesMonday, April 20, 2009
VC deals plummet in Q1
By Mass High Tech Staff
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In the first quarter, venture capital deals in Massachusetts and New England dropped another 16 percent from the year earlier — which itself had been off 40 percent from first-quarter 2007. New England totaled just 61 VC deals in first-quarter 2009 for a value of $594 million, according to Dow Jones VentureSource. It was the lowest first-quarter investment total since 1998, when local financings reached $439 million.
National venture investment plunged to an 11-year low in the first quarter, with VCs investing just $3.90 billion in U.S. companies in the quarter, a 50 percent drop from $7.78 billion invested in Q1 2008. It was the lowest quarterly investment total since 1998.
The 477 venture deals completed nationally in Q1 were the VC industry’s lowest quarterly deal total since 1996.
Massachusetts companies A123 Systems and Proteon Therapeutics represented the highwater mark among Massachusetts-based startups receiving funding during the quarter. A123’s $69 million funding from GE Capital, GE Energy Financial Services and other investors was the second-highest deal amount during the quarter, coming below a $100 million deal for Open Range Communications of Colorado from investor One Equity Partners.
Biopharmaceutical startup Proteon Therapeutics Inc. notched a $38 million deal with investors MPM Capital (acting for MPM Bio IV NVS Strategic Fund LP), new investor Vectis Healthcare & Life Sciences Fund, and existing investors, such as TVM Capital, Skyline Ventures, Prism VentureWorks and Intersouth Partners. There were several original angel investors involved, as well.
The VC investment drought affected regions nationwide, according to Dow Jones VentureSource data. Even as the San Francisco Bay Area attracted most of the nation’s capital, that region saw investment fall 57 percent, to $1.14 billion, with 139 deals complete, the Bay Area’s lowest investment and deal totals in at least a decade, the financial service reported.
The New York Metro region attracted $390 million in 46 completed deals, 40 percent off its year-earlier total, when $655 million went to startups in the region, the data showed.
The health care industry showed the smalled year-over-year drop, at 34 percent, with subsectors such as biopharmaceuticals slipping 21% from $918 million in 69 deals in Q1 2008 to $723 million put into 56 deals in Q1 2009. Medical device companies saw investment fall 51 percent, from the $972 million put into 74 deals last year to $477 million invested in just 42 deals in the most recent quarter.
Even the energy and utilities industry saw a drop, tallying just $189 million in 15 deals during the first quarter, down 59 percent from the $457 million it saw invested in 24 deals last year, Dow Jones reported. The renewable energy sector, which makes up the most of the clean-tech category, accounted for the majority of the industry’s investment in the first quarter with $117 million put into nine deals — but that was a 73 percent decline from the $427 million invested in 16 renewable energy deals in the first quarter of 2008, Dow Jones data showed.
With no IPOs in eight months, M&A activity hasn’t been much healthier. The largest M&A deal in New England in the first quarter of this year was Premise Corp. of Farmington, Conn., a medical software firm that was bought for $38.5 million by Eclipsys Corp. of Atlanta. Right behind that was the acquisition of Mazu Networks Inc. for $25 million by San Francisco-based Riverbed Technology Inc. Rounding out the list was Millipore Corp.’s purchase of biopharmaceutical Guava Technologies Inc. of California for $22 million.
During the first quarter of 2009, venture capitalists made just $3.2 billion via mergers or acquisitions of 68 portfolio companies, a 65 percent drop from the $9.1 billion in liquidity generated in the first quarter of 2008. That is the lowest quarterly total since 2003, the report states.
Those 68 M&As were down sharply from the 104 in the first quarter of 2008 and counts as the lowest number of M&A deals in a single quarter since 1999.
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