New England Venture Activity Picks Up Slightly in Second Quarter, but Still Nowhere Near 2007 Levels

Second-quarter venture activity in the New England region recovered somewhat after a tepid first quarter—but was still down significantly compared to the same period a year ago, according to data released over the weekend by Dow Jones VentureSource.

Private equity investments by New England venture firms totaled $714 million for the quarter, a 16 percent increase over the first quarter’s disappointing $615 million (the poorest performance since mid-2005). But, reflecting the national trend, New England startups collected quite a bit less (23 percent) in the second quarter of 2008 than they did in the second quarter of 2007.

The declines weren’t uniform across all industries, however. Healthcare helped to drag down the statistics the most, with 21 deals worth a total of $299 million in 2Q08, compared to 38 deals worth $408 million in 2Q07. Information technology fared just as poorly, with 34 deals in the quarter worth $226 million, compared to 58 deals worth $423 million in 2Q07. But energy and utility startups were hot—they attracted 6 funding rounds worth $28 million in the second quarter this year, compared to exactly zero a year ago. Startups offering business and financial services and industrial goods and materials also saw increased venture interest.

Interestingly, the region’s biggest venture rounds for the second quarter tended to be significantly larger than the first quarter’s leading rounds. While only four of the top ten financing rounds in 1Q08 broke the $20 million mark (Mascoma, Reveal Imaging Technologies, Virtual Iron, and Vlingo), all of the top 10 deals in the second quarter were for $25 million or more. Here’s a list:

Enlight BiosciencesBoston$39 millionEli Lilly, Merck, Pfizer, Puretech Ventures
Aspen AerogelsNorthborough, MA$37 millionArcapita Ventures, Lehman Brothers Venture Partners, Reservoir Capital Group, RockPort Capital Partners
Concert PharmaceuticalsLexington, MA$37 millionFlagship Ventures, Greylock Partners, Mediphase Venture Partners, New Leaf Venture Partners, Skyline Ventures, SR One, Three Arch Partners, TVM Capital, Undisclosed Private Equity Investor, Westfield Capital Management
EnVivo PharmaceuticalsWatertown, NH$35 millionFidelity Biosciences
SegwayBedford, NH$35 millionCredit Suisse Customized Fund Investment
Agios PharmaceuticalsBoston$33 millionArch Venture Partners, Flagship Ventures, Third Rock Ventures
Constellation PharmaceuticalsCambridge, MA$32 millionColumn Group, Third Rock Ventures, Venrock
OmniGuideCambridge MA$25 million3i Group, Electro Scientific Industries, Gainesborough Investments, Individual Investors, Psilos Group Partners, Stata Venture Partners, Westbury Partners
Retail ConvergenceBoston$25 millionBreakaway Ventures, General Catalyst Partners
StromedixCambridge, MA$25 millionAtlas Venture, Bessemer Venture Partners, Frazier Healthcare Ventures, New Leaf Venture Partners, Red Abbey Venture Partners

While anyone who follows the news about venture-backed startups in New England will see some familiar names coming up again and again, the VentureSource data indicate that New England companies actually have connections with a large number of venture firms nationwide, and don’t seem to depend too heavily on a small cluster of firms, as startups in some other regions do. The eight firms most active in the region, listed below, were involved in only 27 of the region’s 76 funding rounds (not accounting for overlaps).

Most Active Venture Capital Firms Investing in New England, 2Q08

FirmCity# of Deals
General Catalyst PartnersCambridge, MA5
Atlas VentureWaltham, MA4
Flybridge Capital PartnersBoston3
New Enterprise AssociatesMenlo Park, CA3
Matrix PartnersWaltham, MA3
Lehman Brothers Venture PartnersNew York3
Flagship VenturesCambridge, MA3
Charles River VenturesWaltham, MA3

Dow Jones VentureSource rival PricewaterhouseCoopers MoneyTree also released a quarterly summary of venture activity over the weekend, using data provided by Thomson Reuters. The numbers in the two reports don’t match up precisely; for the New England region, the quarter-to-quarter shifts evident in the MoneyTree data are less dramatic than those in the VentureSource data. But the trend lines are the same. According to the MoneyTree report, New England firms raised $822.9 million in venture capital funding in the second quarter, up 5.5 percent from the first-quarter total of $779.9 million, but down 6.1 percent from 2Q07’s strong $875.9 million total.

Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

Trending on Xconomy