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While June may have seen a deluge of rain in New England, July was witness to the start of early-stage venture funding raining down on area technology firms, in what experts describe as a good sign for an improving economy.
Typical of the companies collecting cash at the start of the third quarter was Fluidnet Corp. of Portsmouth, N.H. But the medical devices startup was not alone — 14 other tech companies brought in a reported $97.45 million in Series B or earlier rounds last month.
By comparison, the entire first quarter of this year saw just 10 deals in Series A or B rounds, valued at a total of $50.8 million, according to Dow Jones & Co. And the third quarter of 2008 saw just 17 deals at that stage for a total of $102.25 million.
For Fluidnet, the new funding came in mid-July, in the form of $2.3 million from investors including Cardinal Partners of Princeton, N.J., and Rockport Venture Partners of Beverly, according to CEO Jeffrey Carlisle. That money adds to Fluidnet’s Series A round of approximately $8 million in 2007 to bring the company’s total funding to just over $10 million.
“The $2.3 million is just a bridge from current investors to the next financing, which will be a $17.3 million Series B,” Carlisle said.
The small spike in early-stage funding is the result of deals in the works for a while now, said James Geshwiler, managing director of CommonAngels of Lexington. “What you are looking at right now is just the fulfillment of activity that has been going on for the past quarter or two, as it takes a few months to get these deals done,” Geshwiler said.
For Geshwiler’s CommonAngels, the economy’s downturn was the sign they needed to ramp up efforts to help start new companies and support those in the early stages.
“CommonAngels has made a clear decision internally that this is a good time to make investments,” Geshwiler said. “We made that decision back in December and stepped on the gas.”
That doesn’t mean companies in CommonAngels’ portfolio can start throwing money around. “You have to do more with less, because you can’t count on a later funding,” he said.
With only six full-time employees, Fluidnet has managed to keep its burn rate low, even while developing a new, wirelessly connected, intravenous infusion pump for use in hospitals.
“We are using a best-in-class, virtual company approach,” Carlisle said. That includes farming out much of the actual product design and engineering to Boston Engineering Corp. “We don’t care what it takes to solve it — we will use hardware, software or Tupperware — whatever it takes,” Carlisle said.
Another life sciences company feeling the VC love in July was Cardiorobotics Inc., which landed $11.6 million in a Series A funding round, led by Eagle Ventures of Pittsburgh. The funding also saw participation from the Rhode Island-based Slater Technology Fund, a previous backer. The new funds will be used to move Cardiorobotics’ main robotic surgery product toward the commercial market by establishing a clinical feasibility trial on humans and gaining regulatory approval in the United States and the European Union.
Biotech SynDevRx Inc. — which is working on anti-angiogenesis therapies based on the work of the late Judah Folkman — took in $570,000 of a planned $1.57 million first funding round. Pharmaceutical company Cerulean Pharma Inc. closed a $10 million Series B-1 round, featuring existing investors Polaris Venture Partners of Waltham, Bessemer Venture Partners of Wellesley, and Venrock and Lux Capital, of New York.
The software sector was also a big winner in July.
Sales lead startup NetProspex Inc. received $1.4 million of a $2 million Series A round. Returning investors include U.K.-based angel Richard Tahta of Episode 1 Partners. The funding represents the first venture dollars for the Waltham-based aggregator of sales leads. NetProspex was founded in 2006 by Garry Halliwell and Jeff Clewley. It had previously taken in two angel rounds, but officials declined to disclose the amount.
Vela Systems Inc., a Burlington-based maker of mobile field administration software for architecture, engineering and construction agencies, added $4.5 million in equity financing with an apparent inside extension to its Series A round. Vela announced in 2007 that it had closed a $6 million Series A. The second close on that fund brings Vela Systems’ Series A to $10.5 million, and its total funding to at least $11.9 million — including a $1.4 million angel round closed in 2006.
Investors include Waltham-based GrandBanks Capital and Commonwealth Capital Ventures, Lexington-based CommonAngels and Boston-based Launchpad Venture Group.
Sonian Inc., an e-mail archiving software provider, raised $4.1 million of a $6.6 million Series A round for a company that until now has not maintained a formal office. Prism Ventureworks is one of two investors in the Dedham-based company, with partner Will Kohler taking a board seat. Kohler and Sonian founder and CTO Greg Arnette declined to name the second syndicated investor.
For Geshwiler, such investments are as much a sign of a sharp investment community as it is of any recovery. After all, when the economy is down, investors should be taking advantage of the lower costs.
He said: “I didn’t have to go to business school to learn ‘buy low, sell high.’”
Editor's Note: A previous version of this article misstated Fluidnet's Series B funding. The correct amount of Series B funding that Fluidnet is aiming for is $17.3 million.
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