Funding for Massachusetts Startups Slower, but Still Strong, in August; Early-Stage Deals Predominate

Xconomy Boston — 

The pace of everything in Massachusetts seems to slow in August, and startup financings were not an exception this year. But despite the tail off from July’s big deal-making surge, investments in Bay State startups looked pretty good last month. All told, VCs pumped $179.2 million into 21 deals, according to data provided to Xconomy by ChubbyBrain, a New York-based information services company developing tools for investors, startups, and aspiring entrepreneurs. And while the August tally was below the $215 million and 25 deals seen in July, it was nicely above June’s total of $139.5 million invested in 15 deals—and has to be seen as more evidence that the economy is on the rebound.

The biggest venture deal of the month was a $29 million Series D round for Gloucester Pharmaceuticals. The money came at a great time for the cancer drug developer and its investors: in early September, just a few weeks after the round closed, Gloucester’s drug for cutaneous T-cell lymphoma, romidepsin, was recommended for approval by the FDA’s cancer drug panel. A bit behind Gloucester in deal size was MIT Media Lab spinout iWalk, which took in $20 million in a Series B round. iWalk is developing an actively powered prosthetic ankle and foot. The stars also aligned for Constellation Pharmaceuticals, which had the month’s third biggest deal, a $17.2 million Series A-II infusion. All three companies are based in Cambridge.

You can find a table of all August Bay State venture deals on the second page of this post. There was only one debt financing deal in the month, a $360,000ish deal for BigBad, a Boston web development company. That compared to four debt financings last month.ChubbyAugust09BostonCharts

Other highlights from the August ChubbyBrain data:

—The 21 venture investments ran the gamut from early- to late-stage deals, but once again the majority involved earlier rounds, with one seed stage deal, six Series A financings, and five Series B rounds. And that’s without counting the four deals where the stage of the round could not be determined. It’s safe to say that the market for early-stage startups is alive and well.

—Just as in June and July, the most active sectors in August by deal number were healthcare and Internet. Each month their positions have flip-flopped, though. August saw healthcare take the lead again, with seven deals, edging out the Internet sector by one deal. On a dollar basis, though, healthcare dominated, as you might expect given the high costs of operating biotech and other life sciences startups. VCs pumped in $89 million to healthcare companies, compared to just $23.65 million to Internet startups.

—While venture investments spanned just about every sector of the high-tech economy last month, energy was shut out for the second time in three months. The exception, July, saw just one deal in this sector. You have to wonder if the bloom is off the rose for energy companies.

—No single venture firm took the lead when it came to the numbers of deals done, but Atlas Venture, General Catalyst Partners, Charles River Ventures, Highland Capital Partners, and Flagship Ventures each took part in two deals during the month.

August 2009 MA Venture Investments