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Saturday, July 18, 2009
VC investing marks Q2 upswing; New England sees minimal improvement
By Galen Moore
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How is the economic crisis affecting tech companies?
The second quarter of 2009 appeared to mark a turnaround for venture capital investing, as total dollars invested in venture-backed companies increased over the previous quarter for the first time since Q2, 2008, according to numbers released Saturday by Dow Jones VentureSource. However, New England-based startups did not share in the relative prosperity.
Dow Jones’ quarterly and annual figures are reported voluntarily to the organization by investors, under the condition that certain deals not be disclosed, except as part of aggregated, industrywide numbers.
Nationwide, across all sectors, venture-backed companies took in $5.3 billion in Q2, 2009, spread across 595 funding deals, the financial tracking organization reported. The total dollars represented a 31.7 percent increase over Q1’s dismal $4 billion invested – the greatest Q2 over Q1 increase in the past five years.
Healthcare saw the greatest increase, outpacing information technology (IT) for the first time with $2.2 billion invested — a 61.6 percent jump over Q1.
In a prepared statement issued Saturday, VentureSource director of global research Jessica Canning said the venture industry is rebounding and cited deal growth in sectors like medical devices and information services, at the expense of biopharmaceuticals and software.
If there is a rebound under way, New England states haven’t yet participated. Investment in New England-based startups increased only slightly, according to VentureSource — from $629.2 million in Q1, to $640.1 million in Q2.
Following the national trend, healthcare investment outstripped IT in New England. IT investing continued to fall, dropping from $244.7 million in Q1 to $150.2 million this past quarter. By contrast, Healthcare was the only sector to see an increase, jumping from $317.9 million in Q1 to $370.3 million in Q2. Renewable energy investment took a plunge, falling to $4.1 million from $27.9 million invested in Q1.
Two of Q2’s top 10 venture financings went to New England companies: $54 million in a late-stage round for Portsmouth, N.H.-based pollutant control company Powerspan; and $50 million in a second-round financing for Burlington-based medical device maker ConforMIS.
Nationally, numbers remained down compared to last year’s second quarter, according to VentureSource. Overall venture dollars invested dropped 36.7 percent, to $5.3 billion. IT investment dropped 41.4 percent, to $1.9 billion. Healthcare investment fell 14.3 percent, to $2.2 billion, and renewable energy investment dropped 75.4 percent, to $220.6 million, quarter over quarter.
In New England, this year’s Q2 number represents a 38.8 percent drop below Q2, 2008’s total regional investment of just over $1 billion.
The median size of a venture funding round remained relatively low, hovering around $5 million in VentureSource’s nationwide figures, with IT deals toeing the line at $5 million. Healthcare median deal size saw an uptick to $7.5 million from $6 million in Q1 but came nowhere near recovering their recent peak of $12.7 million in Q2, 2008. Median deal size for energy and utility companies plunged, from $10 million in Q2, 2008 to $4 million in the past quarter, after hitting $15.0 million in Q1. Renewable energy median deal size was not broken out of the total energy and utility sector.
Click here to see an enlarged version of a chart showing a quarter-over-quarter comparison of national venture investment figures, broken out by sector.
Click here to download the full spreadsheet of venture investment data for 2003 through Q2, 2009.
Click here to download the regional breakdown of venture investment data for 2003 through Q2, 2009.
| $ invested Q2 08* |
$ invested Q2 09* |
# of deals Q1 08 |
# of deals Q1 09 |
|
| Business & financial services | $881 | $547 | 93 | 69 |
| Consumer goods | $135.9 | $95.8 | 13 | 13 |
| Consumer services | $231 | $79.8 | 33 | 22 |
| Energy & utilities | $1,070.8 | $317.4 | 37 | 29 |
| Healthcare | $2,597.8 | $2,227 | 184 | 184 |
| Industrial goods & materials | $186.7 | $86.5 | 23 | 18 |
| Information technology | $3,214.6 | $1,882.1 | 338 | 248 |
| Other | $9 | $37.3 | 5 | 12 |
| TOTAL | $8,326.7 | $5,272.7 | 726 | 595 |
*Millions
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