N.E. venture capital hits six-year high
$998m raised in quarter pushed by 'clean energy' deals
Venture capital investing in New England reached a six-year high in the third quarter, while venture outlays edged down nationally, according to the quarterly MoneyTree report released yesterday.
New England's start-ups raised $998 million in the July-September period, an increase of 14 percent over the prior quarter and 46.9 percent over the same period last year.
The region got a strong boost from a pair of investments in "clean energy," a field drawing greater attention from venture capitalists nationwide. One was a $100 million funding round by GreatPoint Energy Inc., a Cambridge company that converts coal and biomass into natural gas. That was the second-largest US deal of the quarter.
Nationally, venture-backed companies raised $7.1 billion in the three months ending Sept. 30, a 1.4 percent decrease from the second quarter but a 4.5 percent increase from last year's third quarter.
US investment activity overall continued in the $7 billion-plus range for the third consecutive quarter, the MoneyTree report showed. The venture report is sponsored by the PricewaterhouseCoopers accounting firm and the National Venture Capital Association trade group based on data from the research firm Thomson Financial.
But while software and biotechnology remained the top two sectors for venture financing, both attracted fewer dollars in the third quarter than in the previous quarter. That shortfall was offset by gains in clean energy, Internet, and media and entertainment investments.
Interest in clean energy was especially keen, as oil prices soared toward $90 a barrel. In addition to the GreatPoint deal, one of the largest financing rounds ever in the alternative energy field, Konarka Technologies Inc., a Lowell company developing solar cells for building materials and mobile phones, raised $45 million. In the third quarter overall, US venture firms poured $844 million into the clean technology sector, an 80 percent increase from the second quarter.
"Clean tech seems to be gaining ground," said Kevin Shaw, partner at PricewaterhouseCoopers in Boston. "All the venture capitalists have their eyes on that industry. Given the educational institutions we have in New England, we're likely to get our share of these companies."
New England continued to be the second-largest US venture capital market in the third quarter, after California's Silicon Valley.
Venture firms in the Valley have also been funding clean energy start-ups, including companies developing alternatives to oil, reengineering buildings, and upgrading the electricity infrastructure. "Clean tech is reaching critical mass as a venture category," said Bryan Stolle, a partner at Mohr Davidow Ventures in Menlo Park, Calif.
But the largest single financing round of the quarter went to Globus Medical Inc., a medical-devices company in Audubon, Pa., which raised $110 million, according to the MoneyTree report.
The number of venture deals nationally declined to 887 in the third quarter, from 1,000 in the prior three months. In New England, the number fell to 143 from 199. The third quarter also saw an increase in the size of deals and in "later stage" financing to companies getting closer to being acquired or going public.
"What the larger deals indicate is the venture firms are more enthusiastic about the companies and they might be trying to accelerate them faster to a liquidity event" such as a merger or IPO, said Joan Parsons, eastern division manager of Silicon Valley Bank in Newton, which provides banking services to venture-backed companies.
John Taylor, vice president of research at the National Venture Capital Association, said the shift to later stage funding, at the expense of seed and early-stage deals, may challenge the notion that the venture capital firms have largely pruned their holdings of investments from the dotcom bubble era earlier in the decade.
"The industry is still paying attention and putting time and energy and dollars into some of the companies that have been in their portfolio for some time," Taylor noted.
Robert Weisman can be reached at weisman@globe.com.
