Little ventured for start-ups

Venture capital funding fell off a cliff in the first quarter, according to the latest MoneyTree venture capital survey, which is scheduled to be released today. In New England, companies raised $375.7 million in venture capital from January through March, down 55 percent from the same period a year ago and down 51 percent from the fourth quarter.

"It's really tough to get money," said Kevin Shaw, a Boston partner with PricewaterhouseCoopers, the accounting firm that jointly sponsors the survey with the National Venture Capital Association, an industry trade group.

The decline mirrors a nationwide collapse in venture funding in the wake of the recession and financial crisis, which have made it difficult for venture capital firms to raise new money from investors and nearly impossible for promising private companies to launch initial public offerings.

"This goes hand in hand with everything that is going on in the global economy," Shaw said.

Nationally, companies raised just $3 billion in venture capital money in the first quarter, down 61 percent from the same quarter a year ago and 47 percent from the fourth quarter. That's the lowest it has been both nationally and in New England since 1997. The survey is based on data collected from Thomson Reuters.

Biotechnology and software remained the two hottest industries to receive funding, in New England and nationwide. In New England, biotech accounted for 40 percent of deals, while software made up 25 percent of deals. Yet overall investing was slow; there were just 67 venture capital deals in New England last quarter - half the tally a year ago.

Just four companies raised $20 million or more: BioVex Group Inc., a Woburn vaccine company, raised $40 million; Proteon Therapeutics Inc., a Waltham company developing drugs for renal and vascular diseases, hauled in $25 million; Genocea Biosciences Inc., an early-stage Cambridge vaccine company, landed $23 million; and Ze-Gen Inc., a Brighton firm working on ways to convert waste into gas, got $20 million.

But other firms in the green energy business weren't so fortunate. After pumping $1.1 billion in venture funding to cleaner energy technologies in the first quarter of 2008 nationwide, venture firms put just $154 million into the sector this past quarter.

Noubar Afeyan, managing partner of Flagship Ventures in Boston, said the sector appears to have burst, similar to the dot-com bubble in the past.

"Too much money went into too many companies," Afeyan said, though he thought some funding would continue for promising businesses.

Regardless, John Taylor, a vice president with the National Venture Capital Association, said he thought the second-quarter venture capital numbers might be better overall, because he heard that some deals due to close in the first quarter were pushed to the second.

"It's taking longer to get the deals done," Taylor said. "We would anticipate some improvement in the second quarter."

Todd Wallack can be reached at twallack@globe.com.